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Supply, Demand, and Entrepreneurial Ventures In the Space Launch Industry by Harry Karasopoulos Ph. D. Aerospace Engineering, University of Cincinnati, 1994 M. S. Astronautical Engineering, Air Force Institute of Technology, 1988 B. S. Aerospace Engineering, Boston University, 1984 Submitted to the Alfred P. Sloan School of Management in Partial Fulfillment of the Requirements for the Degree of Master of Science in the Management of Technology at the Massachusetts Institute of Technology June 2001 © 2001 Harry Karasopoulos. All rights reserved. The author hereby grants to MIT permission to reproduce and to distribute publicly paper and electronic copies of this thesis document in whole or in part. Certified by: M. Diane Burton, Thesis Supervisor, Assistant Professor of Management, Sloan School of Management, Massachusetts Institute of Technology Accepted by: David A. Weber, Director, Management of Technology Program, Sloan School of Management, Massachusetts Institute of Technology

Transcript of Karasopoulos - MIT Sloan Thesis

Page 1: Karasopoulos - MIT Sloan Thesis

Supply, Demand, and Entrepreneurial Ventures

In the Space Launch Industry

by

Harry Karasopoulos

Ph. D. Aerospace Engineering, University of Cincinnati, 1994

M. S. Astronautical Engineering, Air Force Institute of Technology, 1988

B. S. Aerospace Engineering, Boston University, 1984

Submitted to the Alfred P. Sloan School of Management in

Partial Fulfillment of the Requirements for the Degree of

Master of Science in the Management of Technology

at the

Massachusetts Institute of Technology

June 2001

© 2001 Harry Karasopoulos. All rights reserved.

The author hereby grants to MIT permission to reproduce and to distribute publicly paper and electronic copies of this thesis document in whole or in part.

Certified by: M. Diane Burton, Thesis Supervisor, Assistant Professor of Management, Sloan School of Management, Massachusetts Institute of Technology

Accepted by: David A. Weber, Director, Management of Technology Program, Sloan School of Management, Massachusetts Institute of Technology

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Supply, Demand, and Entrepreneurial Ventures

in the Space Launch Industry

by

Harry Karasopoulos

Submitted to the Alfred P. Sloan School of Management on May 11, 2001 in partial fulfillment of the requirements for

the Degree of Master of Science in the Management of Technology

Abstract

Responsive, affordable space transportation, using reusable launch vehicles (RLVs) to place payloads into orbit at a fraction of today’s exorbitant costs, will become a reality within the next few decades. As the railroads unlocked the American West, and as the modern airplane shrank our planet, reusable launch vehicles will open space with vast scientific, commercial, humanistic, and military payoffs.

The large amount of financing required for commercial RLV development

coupled with significant market risk, the employment of a myriad of high-risk technologies, the lack of Federal assistance beyond early stage RLV technology development, and numerous other barriers to entry have greatly undermined successful RLV system development. Historically, the U.S. government has stepped into the fray of past transportation technology and infrastructure development with investments and funding incentives. Over the past two decades, however, the U.S. government’s record in RLV development has been dismal, characterized by repeated attempts to leapfrog critical technologies rather than applying a pragmatic, stepping stone, “build a little, fly a little” approach that was so successfully utilized in experimental aircraft development a few decades before. Despite a number of failed launch vehicle development endeavors since the development of the Space Shuttle, a wave of private entrepreneurial firms are currently attempting to develop innovative reusable launch vehicle concepts independently of the U.S. government. Originally bolstered by a late 1990s bullish low Earth orbit (LEO) market, the success of these endeavors may be destined to echo that of an analogous wave of failed entrepreneurial expendable launch vehicle development efforts from a few years before, especially now that the LEO market has declined so drastically.

This thesis addresses several aspects of the development of reusable launch

vehicles. Demand for space launch is examined, with attention on commercial

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satellite trends and emerging markets. Space launch supply is assessed, with discussion of the current situation of launch vehicle over-capacity and high global competition. Several reusable and expendable launch vehicle development programs are examined, including the efforts of both small entrepreneurial ventures and large national programs. An introduction to barriers to entrepreneurial RLV development is also presented, focusing on legitimacy issues and the problems of financing such high-risk ventures. Finally, technology and market entry competitive strategies for entrepreneurial RLV ventures are discussed and recommendations offered.

Thesis Supervisor: M. Diane Burton Title: Assistant Professor of Management

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Biographical Note Born and raised in Maine, I moved to Ohio in 1984 after finishing my B.S. in

aerospace engineering at Boston University. I have since worked for the Air Force Research Laboratory (AFRL) near Dayton, Ohio. I began my career in applied research and computer software contract management. Over the years I spent an increasing amount of time in project engineering and program management, and through mostly part-time study acquired an M.S. in astronautical engineering from the Air Force Institute of Technology, and a Ph.D. in aerospace engineering from the University of Cincinnati. My most recent position in AFRL was managing the Space Operations Vehicle Technology Office in the Air Vehicles Directorate while at the same time serving as deputy chief for its parent program, the Military Spaceplane Integrated Technology Thrust Program. The objective of these programs is to mature technologies that enable development of an Air Force space system consisting of reusable launch and space vehicles. The programs cover a very broad range of technologies spanning across all AFRL directorates and many external organizations, including NASA, industry, and academia.

One of my career highlights was managing the Mini Spaceplane Technology

program with Boeing, which developed the X-40A Space Maneuver Vehicle flight test vehicle for the Air Force. This two year, intensive program culminated in a successful atmospheric flight test in 1998; under the subsequent X-37 program, NASA and Boeing will launch a derivative of the X-40a into space from the Space Shuttle in 2003 or 2004. I’ve also enjoyed acting as the AFRL focal point for reusable launch vehicle conceptual design and technology development over the last few years. This has allowed me to interact with nearly a dozen entrepreneurial reusable launch vehicle companies, primarily as an independent assessor of the technical maturity and viability of their designs, and occasionally as a research collaborator. These experiences provoked my curiosity about the business side of space launch, prompting the research contained in this thesis.

My research interests have been in trajectory optimization, hypersonic flight, and

orbital mechanics. I studied the flight dynamics of planetary atmospheric entry with my M.S. thesis, and chaos and nonlinear dynamics of satellite attitude motion with my Ph.D. dissertation. Over the years my interest in research waned as my appetite for more applied work and management grew. Fortunately, this migration of interest was accompanied by increasing managerial responsibility; a desire for management knowledge led me here to the MIT Sloan School of Management.

My wife, Robin, took a year leave of absence from her audiology career to

support my schooling and to spend additional time with our three-year-old daughter, Kylie, and our 18-month-old son, Ryan. In her somewhat less than bountiful spare

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time, Robin is working hard to complete her coursework for her doctoral degree this year. In our pre-children days, Robin and I enjoyed hiking in the mountains and traveling. Today, we relive our own childhood with Kylie and Ryan on swing sets, playing with LEGOs, and drawing and painting. I’m also an avid beer brewer and love to fly-fish, wind surf, and attempt to play classical guitar.

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Acknowledgement

I’ll never forget one particular summer evening in my youth. It was my seventh birthday and my friend who lived across the street came over to celebrate. After dinner, cake and ice cream, and a bit of television, we camped outside under the stars in the open tree house my father had built in the apple trees behind our house.

I recall only one present from that birthday, some thirty-one years ago. It was a

present not meant for me, but nonetheless a present of awe, of inspiration that has stayed with me ever since. That gift was seeing the live, grainy, riveting image on our television of Neil Armstrong taking the first human footsteps on the moon. Later I read that about half of the population of this planet either watched or listened to the landing.

Later that night in my sleeping bag I remember looking up and seeing the moon

through leaves of the apple trees, wondering when I would be able to follow. I have gazed deep into the night sky many times since. The awe is still there.

I owe humble thanks for much of my inspiration to the courageous few -

Armstrong, Aldrin, Glenn, Shepard, and the others - who risked everything to accomplish so much, and to the many who, like myself, have played but a small, modest role yet share the dream.

Most of all, however, I owe a great debt to my wife, Robin, and my toddlers, Kylie

and Ryan, all who continually inspire me far more than the stars. Many thanks also to Dr. M. Diane Burton for her gracious help and enthusiasm.

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Table of Contents

1. INTRODUCTION................................................................................................. 13

TRANSPORTATION REVOLUTION .........................................................................................13 THE DEVELOPMENT CHALLENGE ........................................................................................13 THE SPACE LAUNCH INDUSTRY...........................................................................................14 REUSABLE LAUNCH VEHICLES ............................................................................................17 THESIS SCOPE ..................................................................................................................18 CAVEATS...........................................................................................................................19

2. DEVELOPMENT OF THE SPACE TRANSPORTATION INDUSTRY................. 20

THE EARLY DAYS ..............................................................................................................20 THE SPACE RACE ..............................................................................................................21 SPACE SHUTTLE PROGRAM................................................................................................24 POST SPACE SHUTTLE CHALLENGER DISASTER ..................................................................28 POST COLD WAR DEVELOPMENT........................................................................................31

3. DEMAND FOR SPACE LAUNCH....................................................................... 34

DEMAND OVERVIEW...........................................................................................................34 Launcher Segmentation: Orbit Reach and Lift Capability......................................................35 The Satellite Industry..............................................................................................................37

GOVERNMENT DEMAND......................................................................................................38 International Space Station Servicing ....................................................................................38 NASA Space Shuttle Replacement ........................................................................................39 Air Force Military Spaceplane System ...................................................................................40

COMMERCIAL DEMAND......................................................................................................42 Technology Transfer Limitations ............................................................................................42 Recent LEO Constellation Woes............................................................................................44 Satellite Size Trends...............................................................................................................46

SUBSTITUTES FOR SPACE TRANSPORTATION PRODUCTS & SERVICES..................................49 Substitutes for Satellites .........................................................................................................49 Substitutes for Launch Vehicles .............................................................................................51

EMERGING MARKETS .........................................................................................................53 Microsatellites .........................................................................................................................54 Space Tourism........................................................................................................................59 “Fast Freight” or Fast Package Delivery ................................................................................69 Solar Power ............................................................................................................................70 Satellite Salvage: Recovery, Repair, Maintenance, and Repositioning.................................71 Space Based Manufacturing ..................................................................................................72 Other Markets: “Spontaneous Space”....................................................................................73

SUMMARY .........................................................................................................................74

4. SPACE TRANSPORTATION SUPPLY: EXPENDABLE LAUNCH VEHICLES . 77

SUPPLY OVERVIEW............................................................................................................77 KEY PLAYERS & RIVALRY...................................................................................................78

Global Competition & Overcapacity .......................................................................................78

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NEW ENTRANTS INTO THE ELV MARKET ............................................................................ 82 United States Air Force, Boeing, & Lockheed Martin - EELV................................................ 82 India – PSLV, GSLV............................................................................................................... 85 Arianespace – Ariane 5.......................................................................................................... 85 Brazil - VLS............................................................................................................................. 88 Japan - H-2A .......................................................................................................................... 88 Sea Launch, Inc. - Zenit-3SL ................................................................................................. 89 USAF - Orbital Suborbital Program Space Launch Vehicle (Minotaur)................................. 90 Eurockot Launch Services GmbH - Rockot ........................................................................... 90 Starsem - Soyuz..................................................................................................................... 91 Microcosm – Scorpius ............................................................................................................ 92 International Launch Services (ILS) – Atlas & Proton............................................................ 93

FAILED ENTREPRENEURIAL EXPENDABLE SPACE LAUNCH VEHICLE EFFORTS ....................... 93 Beal Aerospace – BA-2, 1997 - 2000 .................................................................................... 94 Starstruck, Inc. – Dolphin, 1981 - 1984.................................................................................. 95 American Rocket Company (AMROC) – Aquila, SMLV, 1985 - 1994................................... 95 Space Services, Inc. – Conestoga, 1980 - 1990 ................................................................... 95 EER Systems - Conestoga .................................................................................................... 97 OTRAG (Orbital Transport and Rocket Corporation) – OTRAG-1, 1974 - 1987................... 97

5. SPACE TRANSPORTATION SUPPLY: REUSABLE LAUNCH VEHICLE PROGRAMS & CONCEPTS....................................................................................... 100

LARGE CORPORATE COMMERCIAL RLV PROGRAMS ......................................................... 100 Lockheed Martin – VentureStar ........................................................................................... 100

ENTREPRENEURIAL COMMERCIAL RLV VENTURES ........................................................... 101 Kistler Aerospace Corporation – K-1 ................................................................................... 103 Pioneer Rocketplane - Pathfinder ........................................................................................ 108 Space Access, LLC - SA-1................................................................................................... 110 Kelly Space and Technology – 2nd Generation RLV System / Astroliner ............................ 110

FAILED ENTREPRENEURIAL RLV EFFORTS ....................................................................... 112 Rotary Rocket Company – Roton, 1996 - 2000................................................................... 113

THE X PRIZE COMPETITORS .......................................................................................... 114 U.S. GOVERNMENT REUSABLE LAUNCH VEHICLE PROGRAMS ........................................... 118

NASA’s “1st Generation” RLV: The Space Shuttle............................................................... 118 NASA’s SLI Program: 2nd Generation RLV Program........................................................... 122 United States Air Force – Military Spaceplane System ....................................................... 127

INTERNATIONAL REUSABLE LAUNCH VEHICLE CONCEPTS.................................................. 128 India - AVATAR .................................................................................................................... 128 Japan – Hope-X, SSTO Spaceplane ................................................................................... 129 Europe .................................................................................................................................. 130 China .................................................................................................................................... 132

6. REUSABLE LAUNCH VEHICLE DEVELOPMENT........................................... 133

TECHNICAL CHALLENGES ................................................................................................ 133 RLV DOMINANT DESIGN.................................................................................................. 134 RLV TECHNOLOGY DEVELOPMENT PROGRAMS ................................................................ 136

NASP, X-30 .......................................................................................................................... 136 DC-X, DC-XA........................................................................................................................ 140

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X-33 ......................................................................................................................................142 X-34 ......................................................................................................................................146 X-37 ......................................................................................................................................149 Hyper-X, X-43A.....................................................................................................................152 Space Operations Vehicle Technology Program.................................................................154

TECHNOLOGY DEVELOPMENT OBSERVATIONS...................................................................156 Entrepreneurial Launch Vehicle Development is Very Challenging ....................................156 Entrepreneurial Developers Almost Exclusively Use Current Technology..........................157 Trend in Design Simplicity ....................................................................................................158 Stepping Stone, “Build a Little, Fly a Little” Approach..........................................................159 Disruptive RLV Technologies versus Disruptive RLV Systems ...........................................160 Knowledge Capture & Lessons Learned..............................................................................162 U.S. Government Investment ...............................................................................................164

RLV BARRIERS TO ENTRY................................................................................................166 Financing Issues...................................................................................................................167 Legitimacy Issues .................................................................................................................174

TECHNOLOGY AND MARKET ENTRY COMPETITIVE STRATEGY .............................................180 Market Entry .........................................................................................................................180 Intellectual Property & Appropriability ..................................................................................183 Complementary Assets & Strategic Alliances......................................................................184 Supply-side Economies of Scale & Learning Curve Benefits ..............................................185 Cost versus Price..................................................................................................................187 Launch Vehicle - Payload Interface Standardization ...........................................................188 Proposed Market Entry Strategy for a New Entrepreneurial RLV........................................189

7. SUMMARY & OBSERVATIONS........................................................................192

SUMMARY .......................................................................................................................192 OBSERVATIONS ...............................................................................................................197

8. BIBLIOGRAPHY................................................................................................202

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Figures

Figure 1 Mercury-Redstone 3 Rocket Carrying Alan Shepard..................................... 22 Figure 2 Apollo 13 Saturn V Launch, April 11, 1970.................................................... 23 Figure 3 Space Shuttle Launch ................................................................................... 25 Figure 4 Space Shuttle Landing ................................................................................ 119 Figure 5 NASP X-30 Concept ................................................................................... 138 Figure 6 BMDO - McDonnell Douglas DC-X Launch ................................................. 141 Figure 7 NASA - Lockheed Martin X-33 Concept ...................................................... 143 Figure 8 NASA - Orbital Science X-34 ...................................................................... 147 Figure 9 USAF - Boeing X-40A Space Maneuver Vehicle ......................................... 149 Figure 10 1998 X-40A Space Maneuver Vehicle Flight ............................................. 151 Figure 11 NASA – Micro Craft X-43A ........................................................................ 153 Figure 12 Lockheed Martin – USAF Space Operations Vehicle ................................ 154 Figure 13 Boeing – USAF Space Operations Vehicle ............................................... 155 Figure 14 Some of the Entrepreneurial RLV and ELV Ventures since the 1970s....... 157

Tables

Table 1 Military Versus NASA Commercial / Civil RLV Attributes................................ 41 Table 2 Space Launch Vehicles Launched During Year 2000..................................... 79

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1. Introduction

Transportation Revolution

Responsive, affordable space launch, using reusable launch vehicles (RLVs) to

place payloads into orbit at fraction of today’s exorbitant costs, will become a reality

within the next two decades. As the railroads unlocked the American West, and as

the modern airplane shrank our planet, reusable launch vehicles will open space

with vast commercial, scientific, humanistic, and military payoffs. The nation that

wins this economic space race will gain significantly through the growth of entirely

new industries and new technological developments, reaping large financial rewards

from increases in employment, corporate & personal tax revenues, and export

revenues. Academia and industry will benefit immensely from routine, inexpensive

access to a new laboratory environment, with likely advances in materials,

communications, pharmaceuticals, and energy. Emerging markets such as space

tourism, microsatellites, satellite maintenance and salvage, solar power, and others

unimaginable today may flourish. Global package delivery in mere few hours could

become the norm, making our current overnight delivery services the “snail mail” of

the 21st century. Top Fortune 500 companies might someday own corporate RLVs

to deliver VIPs to important meetings half way across the planet – and return them in

time for dinner.

This transportation revolution will require responsive and affordable space launch

costing an order of magnitude less than that of today’s systems. The keys to

responsiveness and low cost are operability, reusability, and their enabling

technologies; the keys to a successful business case appear to be successful

government involvement in technology development and financing.

The Development Challenge

RLV development is probably the most difficult technical challenge the aerospace

industry has ever faced. Success in this endeavor will require an immense

engineering refocus from subsystem optimal performance to overall launch vehicle

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system operability, and a merging of the currently, widely divergent aircraft and

spacecraft engineering worlds. Success is also dependent upon leadership that

challenges and changes many current space launch practices and paradigms from

both operations and technology development perspectives. Rather than the current

expensive and time-consuming practice of extensively modifying a launch vehicle for

its every payload, for example, a future RLV may have standardized payload

interfaces, analogous to an F-15’s standardized weapon racks. Rather than the

18,000 - 30,000 hours required to refurbish the Space Shuttle’s thermal protection

system tiles between launches, an operability-focused technology push will invent a

thermal protection system for an RLV with reductions in turn-around-time of two

orders of magnitude, trading vehicle flight performance for large gains in operability.

The large amount of financing required for commercial RLV development

coupled with significant market risk, the employment of a myriad of high-risk

technologies, the lack of Federal assistance beyond early stage RLV technology

development, and numerous other barriers to entry have greatly undermined

successful RLV system development. Historically, the U.S. government has stepped

into the fray of past transportation technology and infrastructure development with

investments and funding incentives. Over the past two decades, however, the U.S.

government’s performance in RLV development has been deficient, characterized by

repeated attempts to leapfrog critical technologies rather than applying a pragmatic,

stepping stone, “build a little, fly a little” approach that was so successfully utilized in

experimental aircraft development a few decades before.

The Space Launch Industry

Worldwide commercial space spending was over $70 billion in 1997 and is

projected to grow to nearly $140 billion by 2005.1 The space launch industry’s

portion of this grew significantly in the 1990s, averaging about 20% growth per year,

with worldwide revenues exceeding $6.7 billion in 1999. The total impact on the

1 “Lockheed Martin Sees Commercial Space Market Doubling by 2005,” Aerospace Daily, Vol. 187, No. 21, July 31, 1998.

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United States economy of the U.S. commercial space launch industry and of the

industry sectors it enables (launch vehicle manufacturing, launch services, satellite

and ground equipment manufacturing, satellite services, remote sensing, and related

distribution) was recently calculated to be $61.3 billion for 1999 by the Federal

Aviation Administration Associate Administrator for Commercial Space

Transportation (FAA AST).2 In this report, the U.S. commercial space transportation

industry is held directly and indirectly responsible for nearly 500,000 jobs and $16.4

billion in employee earnings in the United States in 1999. The contribution to these

figures by the launch vehicle manufacturing and launch services sector is about

28,600 jobs and $3.5 billion of economic activity, or only about 6% of the total. This

result suggests, according to AST, that the launch vehicle industry is an effective

enabler of other industries, with a cascading impact to the U.S. economy.3

The space launch industry is characterized by a very high degree of risk, high

costs, and very large barriers-to-entry, so large that nearly every successful launch

system in use today was originally sponsored by its respective government.4

Barriers to entry into the launch service market include development of vehicles

requiring very complex, risky, and costly technologies, large expensive infrastructure

investments, and high market risk. Governments and their large aerospace

contractors consequently dominate the industry.

The riskiness of space launch is legendary; the historical launch vehicle success

rate over the past 40 years is only about 85%, and over the past decade, about

95%. Launch failures are unforgiving and almost inevitably result in loss of both the

launch vehicle and its payload, the latter either catastrophically (usually when range

safety personnel are forced to destroy an errant rocket) or by being deployed in an

uncorrectable orbit. Losses from a single launch can amount to more than a billion

of dollars, and in case of the relatively rare manned flight, to loss of life as well. In

2 Associate Administrator for Commercial Space Transportation (AST), The Economic Impact of Commercial Space Transportation on the US Economy, Federal Aviation Administration, February 2001, http://ast.faa.gov. 3 Ibid.

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1999, launch vehicles had only a 90% success rate over 77 attempts worldwide, and

the payloads they successfully inserted into orbit experienced a 94% success rate of

their own.5

Space launch costs are extremely high, with an industry average price tag in the

range of $5,000 - $7,000 for placing one pound of payload into low Earth orbit. The

prices charged by many launch services are competitively influenced by direct or

indirect government subsidies, including investments in research and development,

and launch infrastructure.

Initial outlays to develop a new generation launch vehicle are enormous and the

development process itself is risky and time consuming. Rather than developing a

completely new launch vehicle, manufacturers in the past have instead almost

always incrementally upgraded the performance of their current rockets. After about

half of a century, the result is a launch vehicle industry that exhibits many

characteristics of a mature industry – incremental change, competition based

primarily on price, focus on manufacturing and process technologies rather than

product technologies, etc.

Over the years the satellite industry has matured significantly as well. Payloads,

once few in number, unique, temperamental, and technologically complex, have

become routine, less risky, more robust, and increasingly fabricated using

standardized, commercial off-the-shelf technologies. Ground-based support for

space launch and on-orbit assets has also become more routine. Increased

competition and, in some cases, technology maturation have caused both launch

and payload costs to decline to the degree that small satellites, once the pride of

nations, have become commonplace and owned by universities and even clubs.

4 Many were derived from ballistic missiles developed during the Cold War. 5 Cáceres, Marco, “Why Space Mishaps Are On The Rise,” Aerospace America, July 2000.

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Reusable Launch Vehicles

Except for the partially reusable Space Shuttle system, every orbit capable rocket

today is an expendable launch vehicle (ELV). Reusable launch vehicles (RLVs)

promise vastly increased reliability and lower costs over ELVs,6 and thus they have

been earnestly pursued in research and development programs for more than 30

years. Yet even with R&D investments exceeding tens of billions of dollars, no

developmental RLV program has succeeded. Despite this dismal record, in the last

decade more than 15 small entrepreneurial RLV companies have formed, all vying

to do what governments and the aerospace giants such as Lockheed Martin and

Boeing have failed to do - develop a commercially viable RLV. This, in the face of a

Space Shuttle total development bill of about $40 billion, the failure of the National

Aero Space Plane program to the tune of over $3 billion, the recent failures of the X-

33 and X-34 programs at over $1.5 billion, and a host of deterrents too numerous to

mention here. And this, despite the fact that the past is littered with failed ELV

entrepreneurial efforts, a much less challenging development effort than that posed

by an RLV.

Financial markets have not favored commercial RLV ventures. A number of

entrepreneurial RLV development businesses were started in the mid-1990s,

bolstered by the then bullish, even exuberant, low Earth orbit (LEO) communications

satellite market that appeared to underestimate the threat of fiber optics. With the

bankruptcies or deep financial straits experienced by Iridium, ICO, Orbcomm,

Globalstar and others in the last two years, the LEO market has since declined. It

appears several RLV entrepreneurial ventures will likely soon follow.

The enthusiasm, creativity, and commitment of the RLV entrepreneurs are truly

fascinating. It is unfortunate, however, that technical design viability eludes several

of their designs, especially considering the other daunting barriers to entry they face.

Most, perhaps even all, of the current entrepreneurial RLV development efforts will

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fail.7 Still, there is a real, albeit small, chance of success for a few of the leading

entrants. And, as noted above, the potential payoff is huge – a successful (cost

effective and reliable) RLV would be a disruptive product, turning the entire launch

industry on its ear. And the company that finally pulls off this feat will be compared

in history books to the likes of the Wright brothers. The RLV entrepreneurs thus

form a fascinating sub-industry within the overall conservative aerospace sector, a

very dynamic sub-industry whose time scale has yet to be determined, but with

potential to someday be gainful to the academic studying the dynamics of disruptive

technologies in the vein of Utterback, Christensen, and others.8

Thesis Scope

The commercial space industry is composed of three primary segments - satellite

manufacturing, ground support and services, and space transportation. The focus of

this thesis is on the latter segment, which encompasses rocket manufacturing,

integration, and launch services.

This thesis addresses several facets of the space industry that affect the

development of reusable launch vehicles. Chapter 2 discusses the development of

the space launch industry to set a framework for exploring the industry in more detail

in subsequent chapters. The demand for space launch vehicles is examined in

Chapter 3, focusing on the projected satellite market, since this sector drives

derivative demand for launch vehicles. Emerging markets are also investigated in

addition to other factors influencing demand such as substitutes for satellites and

launch services.

6 Most studies claim an order of magnitude reduction in launch costs is obtainable, along with an increase in reliability of several orders of magnitude. Reliability of the Space Shuttle system, for example, is quoted to be 0.993. 7 Note that in addition to the hurdles mentioned here, statistically very few new business starts succeed. 8 See: Utterback, James, M., Mastering the Dynamics of Innovation, Harvard Business School Press, 1994; and Christensen, Clayton, M, The Innovator’s Dilemma, Harvard Business School Press, 1997.

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The supply of expendable (conventional) launch vehicles is examined in Chapter

4. This section concentrates on new entrants to the launch vehicle market over the

past few years as well as numerous failed entrepreneurial development efforts,

primarily from the 1980s. Chapter 5 presents a number of reusable launch vehicle

concepts under development by the United States government, foreign nations, and

small, private, entrepreneurial firms. The focus of this chapter is on the efforts of

these entrepreneurial ventures which are attempting to adapt to the changing LEO

market.

Several RLV technology development programs are discussed in Chapter 6,

accompanied by discussion of observations from these technology programs and

from technology strategies employed by ELV and RLV developers. An introduction

to barriers to entrepreneurial RLV development is also presented, focusing on

legitimacy issues and the problems of financing such high-risk ventures. Finally,

technology and market entry competitive strategies for entrepreneurial RLV ventures

are discussed and recommendations offered. The thesis closes with Chapter 7’s

summary and conclusions.

Caveats

The scale and scope of this thesis effort did not allow me to examine all of the

ELV and RLV development efforts available in the literature. I thus was forced to

down-select from a larger population the programs and concepts I found most

interesting or relevant to this work as a whole. In particular, with respect to the

small, entrepreneurial RLV ventures, I attempted to select the most mature concepts

from the literature. Inclusion or exclusion of certain concepts does not in any way

imply a systematic assessment of their technical or business viability or an

endorsement of any concepts.

Unless otherwise cited, the assessments and opinions expressed in this work

are the author’s only and should not in any manner be construed as those of the

United States Air Force or the Massachusetts Institute of Technology.

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2. Development of the Space Transportation Industry

Even a basic understanding of the space launch industry is elusive without an

examination of its development over the past half century. This chapter presents a

brief overview; interested readers are urged to refer to any of several good sources

for more detailed information.9

The Early Days

An Austrian engineer by the name of Professor Eugene Sänger is generally

credited as the first to design rocket-powered suborbital and orbital aircraft in his

book called Raketenflugtechnik in 1933.10 Sänger’s later work during World War II

included a design of a suborbital bomber aircraft that would use rocket engines to

skip in and out of the atmosphere. The intent was spaceplane to achieve

intercontinental ranges in order to be able to bomb New York City from Germany.

Although never built, his reusable launch vehicle design was remarkably modern,

and it has graced a number of books since, inspiring generations of aerospace

engineers and a modern European spaceplane design named for him.

An intensive German rocket development program during World War II resulted

in major advancements in the field. In addition to rocket-powered aircraft, Germany

developed the first ballistic missile, the V-2. The V-2 had a maximum speed of

about Mach 4 and was used against the British in 1945. In essence, the U.S. and

Soviet space race effectively began at the end of World War II with their respective

acquisition of many German rocket engineers and scientists from Peenemünde who

had designed and built the V-2 ballistic missile. The V-2 technology and its German

developers formed the foundation for American and Soviet intercontinental ballistic

missile (ICBM) development during the Cold War, which in turn formed the basis for

many of the expendable launch vehicles (ELVs) still used today.

9 See, for example, www.ksc.nasa.gov/history/rocket-history.txt, or the excellent collection, “The Last Frontier: Archives and History,” at the University of Sidney’s web site, www.edfac.usyd.edu.au/staff/souters/space/archives.html#archsh. 10 Ashford, David and Collins, Patrick, Your Spaceflight Manual – How You Could Be A Tourist in Space Within Twenty Years, Headline Book Publishing Plc, London, U.K., 1990.

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For many years, from the close of World War II until the late 1950s, national

defense concerns dominated many governments’ focus on space, creating a race to

develop effective, accurate ICBMs with nuclear warheads. This defense focus

provided the impetuous for governments – especially for the Soviet Union and the

United States who eyed one another with no small amount of trepidation - to spend

huge amounts of capital to develop high performance ELVs. Physics dictates that

the maximum velocity required to launch an ICBM to the other side of the planet is

only one to two percent less than the total velocity required to reach orbit. Thus the

first ICBMs were a close, evolutionary step from the first orbit capable expendable

launch vehicles.11 This phase of international competition to develop ICBMs was

overtaken in the late 1950s by the popularly termed “space race.”

The Space Race

The space race began in earnest 1957, with the Soviets’ unexpected insertion of

Sputnik, the world’s first artificial satellite, in low Earth orbit. This event was a shock

to most of the world, and particularly to the United States who had thought its own

technology to be superior to the Soviet Unions’. The U.S. answered the Soviet

challenge by hurriedly establishing the National Aeronautics & Space Administration

(NASA) that year, constructed out of the National Advisory Committee for

Aeronautics (NACA) and other government organizations, and charging it to execute

a civilian space program. The well-publicized race to put men in space was on,

driven largely by national prestige as well as defense concerns.

Throughout the late 1950s and most of the 1960s the space race drove a very

rapid acceleration of technological progress in space launch. Some highlights

pertinent to the development of ELVs are:

11 As this thesis focuses on space launch from the Earth’s surface to low Earth orbit (LEO), from here on I use the term “ELV” to mean an orbit capable expendable launch vehicle. Technically, a small class of ELVs designed for suborbital flight exists (e.g. sounding rockets) but are ignored here.

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• The U.S.’s Juno Launcher, derived from the Redstone ballistic missile of

1953, put the first American satellite into space in 1958.

• Soviet cosmonaut Yuri Gagarin was the first human in space and the first to

orbit the Earth in April 1961.

• The first American in space (suborbital flight) was Alan Shepard in May 1961

using the Redstone Mercury launcher (Figure 1), derived from the ballistic

missile of its namesake.

• The first American to orbit the Earth was John Glenn in 1962 using an Atlas

rocket.

Figure 1 Mercury-Redstone 3 Rocket Carrying Alan Shepard

in First U.S. Manned Spaceflight, May 5, 1961 (Photograph compliments of NASA)

The Atlas rocket was the first American ICBM, first operational in 1960; a

modification of it is still in production today, more than forty years later. Likewise,

the Thor intermediate-range ballistic missile from the 1950s led to the Thor-Agena

and then the Delta II ELVs. Today’s Titan ELV is yet another example of a first

generation U.S. ballistic missile developed in the late 1950s of which an ELV

derivative is still in use today. In fact the Evolved Expendable Launch Vehicle

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(EELV) program,12 a partnership between the United States Air Force, Lockheed

Martin Corporation, and The Boeing Company, is currently developing new versions

of some of these launch vehicles, the Atlas V and the Delta IV, to replace existing

Atlas, Titan, and Delta ELV fleets.

The space race took a momentous twist with

John F. Kennedy’s famous challenge to put man

on the moon before the end of the 1960s.

Suddenly, launching men and spacecraft to low

Earth orbit (LEO) wasn’t enough; the Soviet –

American race to the moon had begun. Mankind

intended to stretch his reach from LEO operations,

of only 100 miles or so above the Earth’s surface,

to the Moon some 220,000 miles away. The

Apollo lunar program required the development of

the Saturn 1B and the Saturn V rockets, the latter

the largest launch vehicle ever built. Together the

Saturn rockets had 22 successful launches with no

failures.

Figure 2 Apollo 13 Saturn V Launch, April 11, 1970

(Photograph compliments NASA)

The United States and the Soviet Union had the only launch capability

throughout the first 12 years of the space age, from 1957 to 1969, while engaging in

the space race and the race to the moon. In those days space commercialization

was much more stymied than today by the strict prohibition of rocket technology

transfer due to national security efforts to limit the spread of ballistic missile

technology. In 1970, however, Japan and China completed the initial development

of their own launch systems, although with limited success and only infrequent

launches throughout the 1970s. Effectively then, the U.S. and the U.S.S.R. had a

launch duopoly through the 1970s. The end of the 1970s saw additional space

12 The EELV program is discussed in Chapter 4.

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launch proliferation. In December 1979 the European Space Agency (ESA) first

successfully launched their Ariane rocket. India soon followed, launching its first

satellite into orbit in July 1980.13

Space Shuttle Program

NASA’s budget was drastically reduced at the end of the Apollo lunar-landing

program. In the early 1970s under the Nixon administration, however, the Space

Shuttle program became NASA’s priority. In the early years of its development, the

Space Shuttle program promised far lower launch costs than existing ELVs as well

as a much more responsive launch capability. Total cost in fiscal year 2000 dollars

for the design, development, and acquisition of the first four Space Shuttles was

about $40 billion,14 and the first shuttle orbital flight occurred in 1981. Test flights

were completed on July 4, 1982, marking the start of commercial operations.

While the Shuttle (Figure 3) was being developed, the Nixon administration

specified that all existing ELV programs were to be terminated when the Shuttle fleet

became operational, since every U.S. satellite from that point on would be launched

by the Space Shuttles. The United States government’s decision to phase out ELVs

not surprisingly led to a drastic reduction in research and development of

expendable launch vehicles. Furthermore, companies were encouraged by the

government to produce their ELVs in a very slow, continuous production mode.

Production slowdowns in concert with Shuttle development delays hurt

manufacturing economies of scale, causing ELV production costs rise, a situation

encouraged by the government so that expendable launch vehicle prices would be

more competitive with those charged for the Space Shuttle.15

13 Papp, Daniel S, and John, McIntyre, R., Editors, International Space Policy, Greenwood Press, Inc., Westport, Connecticut, 1987, p. 5. 14 Mulville, Daniel, Statement of Daniel Mulville, Chief Engineer, Office of the Administrator, NASA, at the “Space Transportation Architecture Studies: The Future of Earth-to-Orbit Spaceflight” hearing to the House Subcommittee on Space and Aeronautics, U.S. Congress, 27 October 1999, www.house.gov/science/. 15 Hertzfeld, Henry R, “Economic, Market, and Policy Issues of International Launch Vehicle Competition,” in International Space Policy, Papp, Daniel S, and John, McIntyre, R., Editors, Greenwood Press, Inc., Westport, Connecticut, 1987.

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Figure 3 Space Shuttle Launch

(Photograph compliments of NASA)

It wasn’t long after the Shuttle became operational before it became blatantly

obvious that launch costs and flight frequency were in practice far from ideal, the

former more than an order of magnitude higher than predicted. Regardless, NASA

continued with its highly political commitment to launch all payloads with the Shuttle.

The United States government’s hesitancy and long delays in eliminating ELVs in

the early 1980s contributed much uncertainty in the marketplace, delaying

commercial investment in new ELV systems. The Air Force, long unhappy about

what it saw as too much dependency on a sole source space launcher, repeatedly

criticized NASA’s insistence on using only the Shuttle to launch all U.S. payloads.

Finally, in 1984 over NASA protests the Air Force requested proposals for a new

ELV system that could launch Shuttle class payloads. In 1985 the Air Force

contracted with Martin Marietta to develop ten “complementary” (to the shuttle) ELVs

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or “CELVs” for the 1988 – 1992 time period. Martin Marrieta’s winning CELV was

the Titan 34D7, later known as the Titan 4.16, 17

In vein with its general policy of deregulation, the Reagan administration began

to encourage privatization and commercialization of space transportation in 1982.18

This encouragement was manifested in the administration's 1982 National Space

Policy and the National Security Council's 1983 policy for ELV commercialization.19

The latter policy statement fully endorsed commercialization of expendable launch

vehicles by the private sector, and encouraged commercial use of government

launch ranges. The policy also called for indirect subsidies for commercial ELVs in

the form of lower prices for use of government facilities, equipment, and services.

The aerospace industry reacted very cautiously, however, primarily due to the

difficulties competing in a market entirely composed of government-owned or

subsidized launches. One exception was Starstruck, Inc., a small entrepreneurial

ELV development venture that began operations in 1981 and conducted a flight test

in 1984 shortly before folding.20 Another exception was Space Services, Inc. (SSI).

One of the earliest private ELV ventures, SSI carried out the first successful privately

funded rocket launch by a private U.S. company in September 1982.21 In order to

conduct the launch, however, SSI had to suffer a difficult process to gain approval

and a license, through seventeen different United States government offices.22 As a

result of this difficulty, Reagan delegated responsibility for the process to the

Department of Transportation, which set up its Office of Commercial Space

Transportation in December 1983.

16 From: Cole, Bob, The Prospects for U.S. Ventures in Space Launch, IC2 Institute, The University of Texas at Austin, 1989; and Pace, Scott, U.S. Access to Space: Launch Vehicle Choices for 1990 – 2010, RAND Project AIR FORCE, RAND Corporation, Santa Monica, California, March 1990. 17 The number of CELVs ordered by the Air Force was more than doubled after the Shuttle Challenger disaster. 18 Brooks, Timothy A, “Regulating International Trade in Launch Services,” Berkley Technology Law Journal, Volume 6:1, Spring 1991, www.law.berkeley.edu/journals/btlj/articles/vol6.html. 19 Ibid, Brooks. 20 See Chapter 4 for more information on this and other ELV entrepreneurial development efforts. 21 Cole, Bob, The Prospects for U.S. Ventures in Space Launch, IC2 Institute, The University of Texas at Austin, 1989.

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The Reagan administration continued it’s efforts to privatize the commercial

launch industry, and Congress cooperated with the Commercial Space Launch Act

in 1984, which encouraged entrepreneurial space transportation investment by

establishing launch vehicle licensing and insurance regulations and allowing use of

government facilities. After President Reagan’s announcement, U.S. companies

entered the private launch services market, somewhat cautiously due to concern

that a later U.S. administration might revoke this policy, McDonnell Douglas

Astronautics Company with its reliable Delta ELV, Martin-Marrietta Corporation with

its Titan 3 originally made by the Martin Company for the Air Force,23 and General

Dynamics Corporation with its Atlas ELV. Numerous other aerospace companies,

such as Boeing Aerospace Company and Hughes Aircraft Corporation, invested in

R&D for new ELV systems.24 In response to the Shuttle fleet’s inability to meet

demand, the Reagan administration finally restored allowance for use of commercial

ELVs in 1985.25

Curiously, while the Reagan administration promoted commercialization of ELVs,

NASA was doing the opposite, using its multi-billion dollar annual expenditures in the

aerospace industry to discourage aerospace contractors from developing ELV

systems that would compete with NASA’s Shuttle.26 NASA also constructed another

massive barrier to entry to potential private ELV ventures – low, subsidized launch

prices with which only other nationally subsidized offers such as Arianespace could

compete.

NASA had a monopoly of the commercial space launch market for the Western

world for more than the first two decades of the space age. The European

22 Ibid. 23 www.ast.lmco.com/company_history.shtml. The American-Marietta Corporation and Glenn L. Martin Company merged in 1961. 24 Papp, Daniel S, and John, McIntyre, R., Editors, International Space Policy, Greenwood Press, Inc., Westport, Connecticut, 1987, pp. 6 – 7. 25 Sietzen, Frank, Jr, “Air Force Evolved Rocket May Restore U.S. Launch Leadership,” Space.com, 12 July 1999. 26 Cole, Bob, The Prospects for U.S. Ventures in Space Launch, IC2 Institute, The University of Texas at Austin, 1989.

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consortium Arianespace entered the space launch commercial market by first

launching their Ariane launch vehicle in 1980, breaking NASA’s monopoly on

Western commercial space launch. Ariane, however, was still experimental until

1982, and had limited capacity through the mid-1980s. Competition between

Arianespace and NASA changed the game, with demand increasing for lower cost

and higher reliability launch services. Both the Ariane and Shuttle launches were,

and still are today, heavily subsidized. Competition grew in the mid-1980s when

China began offering commercial launch services and the Soviet Union renewed its

attempts to attract Western payloads, raising questions of security, economics, and

national prestige. Security aspects of technology transfer were then, and are still

today, hotly debated and sometimes limited some payloads from using launch

services from restricted nations. Economic issues included domestic and foreign

government subsides for their respective launch services, and ability of Eastern

launcher services to attract launch insurance.

Post Space Shuttle Challenger Disaster

The space shuttle Challenger tragedy occurred in January 1986. A primary

cause was attributed to intense schedule pressure due to NASA’s attempt to

increase launch frequency from five flights in 1984, to nine in 1985, and to fifteen in

1986.27 The disaster was followed shortly by the second consecutive failure of a

Titan launch in an Air Force launch that April, and then a NASA Delta launch

accident in May. Thus, within a span of a few weeks in 1986, all three of the U.S.

major launch systems were grounded for extended periods of time. This left the

United States with almost no capability to launch commercial and military satellites,

which began to accrue waiting for an available launcher. Confidence in the U.S.

space program was severely shaken and NASA’s space strategy sharply criticized.

NASA’s Advisory Council complained in August 1986 that NASA seemed to lack

27 Cole, Bob, The Prospects for U.S. Ventures in Space Launch, IC2 Institute, The University of Texas at Austin, 1989.

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long-range objectives and had allowed its space technology base to deteriorate.28

Reagan’s order for the fourth shuttle and his announcement ordering NASA to stop

launching commercial payloads also occurred the same month.

In 1986 the Reagan administration effectively banned the Shuttle launch of

commercial payloads beyond 14 prioritized ones, in an attempt to encourage

privatization of launch services in the United States. Before this point U.S.

aerospace firms had been reluctant to enter the space launch business,

acknowledging the fact that they could not profitability compete with NASA’s and

ESA’s ability to heavily subsidize launch costs.29 The Challenger disaster in 1986

forced even greater ELV demand. However, for the reasons discussed above, U.S.

ELV fleets had changed very little since the 1970s; they were still based on

retrofitted old 1950’s ballistic missile technology and still extremely expensive.

While the United States was reviewing fundamental national space policy and

strategy and conducting accident investigations on its grounded fleet,30 the rest of

the world did not sit still. The Soviet Union launched their Mir space station only

three weeks after the Challenger accident, and continued to accumulate valuable

experience from its fantastic pace of launches. In 1985, for example, the Soviet

Union had 98 launches compared to only 17 for the United States, a difference

primarily due to the far shorter life span of the average Soviet satellite.31 The Ariane

also had a launch failure in 1986 that grounded the rocket into 1987. However,

Arianespace took advantage of the break down in U.S. launchers in 1986 to

aggressively expand their capability by upgrading the Ariane 3 and pushing the

28 Kranzberg, Melvin, “The Top Line: Space as Man’s New Frontier,” in International Space Policy, Papp, Daniel S, and John, McIntyre, R., Editors, Greenwood Press, Inc., Westport, Connecticut, 1987, p. 16. 29 Papp, Daniel S, and John, McIntyre, R., “Introduction: Space… the Final Frontier,” in International Space Policy, Papp, Daniel S, and John, McIntyre, R., Editors, Greenwood Press, Inc., Westport, Connecticut, 1987. 30 The Challenger disaster grounded the Shuttle fleet for about 2 ½ years, as well as canceling the shuttle-based liquid hydrogen / liquid oxygen propelled Centaur upper stage due to shuttle safety concerns.

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development of the Ariane 4, which was first launched in 1988.32 Nonetheless, due

to the scarcity of launch resources and Reagan’s announcement and subsequent

deletion of a large portion of the Shuttle’s manifest, demand for space launchers

rose sharply. Many American payloads as well as many foreign ones that were cut

from the shuttle manifest flocked to overseas launch service providers. Ariane

continued to launch, and launch frequently, significantly undercutting American

launch prices, especially for American commercial satellites needed by private firms.

Consequently, Arianespace’s business boomed and the market share owned by

U.S. launch vehicle companies dropped. China, which had started marketing its

launch services to foreign commercial customers in 1984, substantially increased

their marketing efforts in early 1987, and began booking contracts with the West in

earnest.33 Chinese launch prices were generally even lower than Arianespace, but

their reliability record was somewhat spotty.

The same 1984 U.S. administrative directive that allowed the Air Force to pursue

alternative space launch to the shuttle also directed the Department of Defense

(DoD) and NASA to jointly study national space launch system architectures for the

1995 – 2010 timeframe. Recommended was development of a very heavy lift

(100,000 lb of payload to LEO) ELV system, followed by an even heavier lift

(150,000 lb) partially reusable launch system, and a two stage fully reusable Shuttle

II, the latter to be operational around 2005.34 While these recommendations were

not acted upon, through the end of the twentieth century this investigation was

followed by numerous other national launch system studies as well as by several

cancelled launch vehicle development efforts. Among these development efforts

31 Kranzberg, Melvin, “The Top Line: Space as Man’s New Frontier,” in International Space Policy, Papp, Daniel S, and John, McIntyre, R., Editors, Greenwood Press, Inc., Westport, Connecticut, 1987, p. 17. 32 Suriano, Robyn, “Florida’s Future in Space: Arianespace is Big Threat to The State,” Florida Today, 1997, www.flatoday.com/space/explore/special/floridasfuture/. 33 Cole, Bob, The Prospects for U.S. Ventures in Space Launch, IC2 Institute, The University of Texas at Austin, 1989. 34 Pace, Scott, U.S. Access to Space: Launch Vehicle Choices for 1990 – 2010, RAND Project AIR FORCE, RAND Corporation, Santa Monica, California, March 1990.

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were the Advanced Launch System (ALS) and the National Aero Space Plane

(NASP) programs, both joint NASA and DoD efforts.

Post Cold War Development

The end of the Cold War with the dissolution of the U.S.S.R. changed the launch

vehicle market significantly. The 1990s saw major consolidation in the U.S. of the

large space industry firms, or “primes”, in response to large reductions in United

States government defense spending and globalization of core technologies.

Boeing acquired Rockwell International and its Space Shuttle program in 1996, and

McDonnell Douglas and its Delta family of launchers in 1997. Similarly, Lockheed

Martin acquired General Dynamics and its Atlas family of launchers in 1994.

Consolidation led to a corresponding increase in global competition, a shift in

reliance towards commercial programs, downsizing, and difficulties in attracting and

retaining quality employees. Gained were some advantages in efficiency, and

maintenance of core technology, engineering competencies, and manufacturing

facilities. Many firms worked hard to convert defense research and development

(R&D) to commercial use.

Consolidation continued into the turn of the century with last year’s $3.75 billion

merger between the U.S. space industry giants, The Boeing Company and Hughes

Space and Communications. Labeled by Space Business News as “by far, the most

significant highlight to hit the commercial sector in 2000,” this merger resulted in a

new space company, Boeing Satellite Systems.35 Lockheed Martin, Boeing’s main

U.S. competitor, also made a major gain in 2000, with its acquisition of Comsat

Corporation.

Major European Union consolidations involving rocket manufacturers also took

place in 1999 and 2000. EADS (European Aeronautic Defense & Space Company)

was formed from a merger of France’s Aerospatiale Matra SA, Germany’s DASA

35 “SBN’s 2000 Year-In-Review Special Issue,” Space Business News, Vol. 18, No. 25, December 6, 2000.

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aerospace (part of DaimlerChrysler), and Spain’s Construcciones Aeronautics SA,

making EADS the world’s third largest aerospace and defense company behind

Boeing and Lockheed Martin Corporation.36

The 1990s saw a large increase in global launch service competition as efforts

stepped up to market new international ELVs. The economic hardship suffered by

Russia and Ukraine after the break up of the Soviet Union also prompted these

countries to commercialize former Soviet ELVs, offering reliable launches at very low

prices. A number of multinational alliances were formed between the East and the

West to launch and market these ELVs and create new ventures, such as Sea

Launch, Eurockot Launch Services GmbH, and International Launch Services.

Significant changes occurred in U.S. space policy as well. After the Challenger

accident, NASA was directed to move commercial payloads from the shuttle to ELVs

in Reagan’s 1988 directive. And until the Launch Services Purchase Act of 1990,

NASA continued to manage ELV launches for civil space customers.37 President

George Bush signed the Launch Services Purchase Act into law in November 1990.

This act effectively prohibited NASA from launching satellites into space, a dramatic

reversal of United States space policy since before that point NASA held a monopoly

on U.S. civil space launch, launching almost every U.S. civil spacecraft before 1990.

Pricing guidelines were established in the 1993 Launch Services Trade Agreements

with Russia and Ukraine to limit the negative effects of their subsidized offerings on

U.S. companies.38 In 1994 the Clinton Administration ordered that hereafter NASA

would be the lead government agency for RLV development and the Air Force the

lead government agency for ELV development. The 1994 National Space

Transportation Policy (NSTC-4) also called for “government and private sector

decisions by the end of this decade on development of an operational, next-

36 Friedman, Robert E., “Standard & Poor’s Industry Surveys: Aerospace & Defense,” August 10, 2000. 37 Anderman, David, “The Launch Services Purchase Act, 10 Years On – A Personal View Of The Campaign To Enact The LSPA,” www.cwo.com/%7Edavida/index.html. 38 Thompson, David W, ”Commercial Space Policy Needs to be Reviewed in the U.S.,” Space News, January 22, 2001, pp. 19 - 20.

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generation reusable launch system.”39 Responding to a number of RLV

development efforts that began in the mid-1990s, U.S. Congress responded with the

Commercial Space Act of 1998, which gave FAA’s AST full authority to license RLVs

in the United States. A rash of export control legislation in the wake of unauthorized

satellite technology transfer to China also occurred in the late 1990s.

Over the years, much work has been accomplished in upgrading ELV

performance to increase lift capability in order to meet demand for heavier

commercial satellites. Heavier lift capability also allows a launch vehicle to carry

more satellites, an economic means of providing launch services for LEO and MEO

communication satellite constellations. However, relatively little work has been

accomplished in actually decreasing launch costs. The United States Air Force is

addressing this problem by currently funding development of two EELV (Evolved

Expendable Launch Vehicle) families, one by Lockheed Martin and the other by

Boeing. The new EELV systems are expected to aid the U.S. in recapturing global

market share by reducing costs by roughly 25% over the current generation of ELVs.

Increased global competition is evident in the RLV arena as well. Reusable

launch vehicle development programs are currently underway in the United States,

Japan, France, and several other nations. The vast majority of these programs,

however, reside in the U.S. in small entrepreneurial RLV firms. Bolstered by the

very hot LEO market a few years ago, Kistler Aerospace, Kelly Space & Technology,

Pioneer Rocketplane, Universal Spacelines, Space Access LLC, Rotary Rocket, and

other entrepreneurial companies formed to develop privately funded RLVs.40 These

firms are challenging the paradigm in the aerospace industry that only the traditional

aerospace giants such as Lockheed Martin and Boeing can possibly successfully

develop reusable launch vehicles.

39 Mulville, Daniel, Statement of Daniel Mulville, Chief Engineer, Office of the Administrator, NASA, at the “Space Transportation Architecture Studies: The Future of Earth-to-Orbit Spaceflight” hearing to the House Subcommittee on Space and Aeronautics, U.S. Congress, 27 October 1999, www.house.gov/science/.

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3. Demand for Space Launch

In this section I present an overview of the demand for space launch, focusing on

demand for low earth orbit (LEO) launch vehicles and two emerging markets,

microsatellites and space tourism. Demand for space launch vehicles is a derived

demand, from the uses of payloads in space.

Demand Overview

The space transportation industry grew significantly in the 1990s, averaging

about 20% growth per year, with worldwide revenues exceeding $6.7 billion in

1999.41 The outlook over the next few years looks dim, however, as demand for

satellite launches drops and more launch systems come on-line. An article in

Military Space predicts total revenues from the launch and launch insurance markets

to grow from $7.6 billion in 1994, peak at almost $11 billion by 2001, and decline to

$6.7 billion by 2004.42 Standard & Poor’s predicts that although worldwide orbital

launches with on-line systems in 1997, 1998, and 1999 numbered 74, 82, and 128,

respectfully, space transportation industry revenues will likely remain constant or

even slightly decline over the next few years.43 A recent Space News article is even

more grim, predicting that the global launch capacity for commercial satellites will

“dwarf demand over the next 10 years, putting heavy downward pressure on prices

and perhaps driving some players out of the market altogether.”44

Worldwide commercial space spending was over $70 billion in 1997 and was

projected by Lockheed Martin in 1998 to grow to nearly $140 billion by 2005.45

40 From: Cáceres, Marco, A, “Too Many Launch Vehicles for the Market?” Aerospace America, February 1999, p. 26; and Iannotta, Ben, “Small Start-ups Vie for Big Business,” Aerospace America, August 1998, p. 34. 41 Friedman, Robert E., “Standard & Poor’s Industry Surveys: Aerospace & Defense,” August 10, 2000. 42 “Forecast Sees Growth in Launch Market,” Military Space, Vol. 15, No. 7, March 30, 1998. 43 Friedman, Robert E, “Standard & Poor’s Industry Surveys – Aerospace & Defense,” August 10, 2000. 44 Ferster, Warren, ”Launch Supply Could Exceed Demand for Next Decade,” Space News, January 22, 2001, p. 8. 45 “Lockheed Martin Sees Commercial Space Market Doubling by 2005,” Aerospace Daily, Vol. 187, No. 21, July 31, 1998, p. 174.

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Such predicted high rates of growth were fueled primarily by large projected

increases in numbers of LEO telecommunications, Internet broadband, and Earth

imaging satellites. The 1997 satellite forecast by the FAA’s Office of Commercial

Space Transportation predicted about 1,063 LEO payloads would need to be

launched in the subsequent decade, driving demand for launches way up.46

Entrepreneurs and launch industry incumbents both reacted to these favorable

forecasts from the mid- to late 1990s by implementing development programs either

alone or in alliances. But within two or three years after that 1997 forecast, Iridium

and ICO had gone bankrupt, and Globalstar and Orbcomm were struggling to

remain solvent. The 2000 satellite forecast by the FAA’s Office of Commercial

Space Transportation projects that 522 LEO payloads will be deployed in the

ensuing decade, almost exactly half of the 1997 prediction.47 In contrast to the

upheaval in the demand for LEO launches, the GEO market has remained relatively

steady over the few years, with the FAA forecasts for demand for GEO launches

fluctuating only by about 10% over the past three years.48

Launcher Segmentation: Orbit Reach and Lift Capability

Selection of a space launch provider is based on a number of decisions: launch

cost, reliability, system performance / payload capacity, availability and schedule,

availability of and cost of insurance, regulatory constraints, political and technical

risk, national security and technology transfer, and working relationships between

the payload company’s and launch firm’s technical and managerial staffs. Selection

of a launcher is also a function of desired final orbit. The vast majority of commercial

satellites are placed either into low Earth orbit (LEO) or geostationary orbit (GEO);

only occasionally is a Medium Earth orbit (MEO) utilized. Low Earth orbit is

generally defined as orbits with altitudes ranging from about 150 miles to 1500

46 Morring, Frank, Jr, “LEO Failures, Shuttle Investment Seen as Obstacles to New RLV,” Aerospace Daily, Vol. 197, No. 25, p. 214, February 8, 2001. 47 Associate Administrator for Commercial Space Transportation (AST), 2000 Commercial Space Transportation Forecasts, Federal Aviation Administration, May 2000, http://ast.faa.gov. 48 Ibid.

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miles,49 typically using orbital inclinations between 0 degrees (for equatorial

coverage) and 101 degrees (polar and sunsychronous orbits), and is used for

communications, scientific payloads, imaging, and data services. More recently,

commercial remote sensing satellites, long the domain of governments, are starting

to be deployed in LEO as well. Space Imaging’s Ikonos, launched in September

1999, was the first of these to become operational.50

Geostationary satellites use a specific orbit, about 22,300 miles directly above

the equator, where they revolve around the Earth at the same angular rate as the

Earth spins on its axis. Satellites in GEO thus remain relatively fixed over the same

spot on the equator, providing an ideal location for communications and Earth

observation satellites. MEO are all orbital altitudes between LEO and GEO. To

achieve GEO requires considerable more energy for the same payload mass than

LEO, and thus requires larger, more powerful and expensive launch vehicles. GEO

launchers loft heavy upper stage boosters into space that insert the payloads into a

geosynchronous transfer orbit (GTO). Because of the high cost of GEO capable

launch vehicles, government involvement is defraying development costs has

always been required in the past and will likely to be necessary for some time. LEO

capable launch vehicles, with payloads ranging from a few hundred pounds to ten or

twenty thousand pounds, are therefore usually the focus of private company

development.

Space launchers are also segmented based on lift capability, the payload weight

delivered into LEO. Light, medium, and heavy lift payload classes are generally

taken to mean payloads in the ranges of less than 10,000 pounds, 10,000 to 20,000

pounds, and more than 20,000 pounds, respectively.

49 Just to complicate matters, not all LEOs are created equal. A launch vehicle’s performance generally degrades with increased orbit inclination. A launch vehicle’s payload capability to an orbital inclination of 28.5 degrees (launching due east launch out of Kennedy, for example) would be significantly less than its payload capability to the International Space Station’s orbital inclination of about 51.6 degrees.

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The Satellite Industry

The satellite industry drives the derivative demand for launch vehicles. Satellite

manufacturing businesses generated revenues of $11.3 billion in 1999, about 1.7

times that of the launch business.51 Like the launch business, satellite

manufacturing is capital intensive, with very large initial development costs for

RDT&E as well as production. Unlike current launch vehicles, however, satellites

can rather quickly become technically obsolete, especially in more recent times as

technology maturation times decrease. While the development cycle time for a new

generation satellite can take from five to seven years, an evolutionary, incremental

upgrade can be developed in about one year.52 It takes about 18 months, on

average, to build a satellite.53

Launch costs are often a significant percentage (typically roughly 50% or more)

of the total cost of designing, fabricating, and placing a satellite into Earth orbit. Due

to the very high cost of space launch, satellite designers and owners must trade-off

the costs of adding double or triple redundancy to critical subsystems to increase the

satellite’s on-orbit reliability with the costs of having to build and re-launch a

replacement satellite. Increasing redundancy increases the cost and weight of the

satellite. If launch costs can be greatly reduced, however, some of this redundancy

may not be necessary, causing payload costs to also decrease.

Some of the variance in the literature of prospects for the space launch industry

over the next decade is likely due to differing assessments of the separate

government and commercial launch markets. Only very recently did commercial

launch payloads outnumber government ones.54 In 1999 commercial customers

accounted for 60% of the launch service market versus 40% by government.

50 Associate Administrator for Commercial Space Transportation (AST), 2000 Commercial Space Transportation Forecasts, Federal Aviation Administration, May 2000, http://ast.faa.gov. 51 Friedman, Robert E., “Standard & Poor’s Industry Surveys: Aerospace & Defense,” August 10, 2000. 52 Ibid. 53 Ibid.

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Government Demand

A significant percentage of total demand for launch services is by the United

States government for Department of Defense weather, surveillance, early warning,

GPS (global positioning system), communications and other satellites. Security

regulations for these payloads restrict the launcher to U.S. companies. Other United

States government agencies such as NASA (National Aeronautics & Space

Administration) and NOAA (National Oceanic and Atmospheric Administration) are

also large buyers and also exclusively employ U.S. launch companies. Even with

costs much higher than those of competitors, NASA’s own Space Shuttle is locked-

in as the launch vehicle for many NASA payloads. For missions and payloads that

require a human presence in space, however, the Space Shuttle holds nearly a

worldwide monopoly with unparalleled capability and versatility.

Future United States government launch demand is expected to rise over the

next decade due to projected modest increases in NASA science and space

exploration needs and in DoD satellite needs.

International Space Station Servicing

Construction of the International Space Station (ISS) will be carried out using

Space Shuttles, requiring a number of launches over the next five or so years. Due

to the very high cost of the Shuttle, however, launch of supplementary construction

materials or, once online, ISS regular re-supply missions have potential for a

significant market value. The costs of using the Space Shuttle to re-supply the

International Space Station over its ten-year design life, as currently planned by

NASA, is estimated at $25 billion.55

While at first glance a lucrative market, current ISS operational characteristics

and constraints may require extensive, perhaps even prohibitively expensive, RLV

54 Most references attribute this crossover to have occurred either in 1997 or 1998. 55 Cowing, Keith, Editor, “Space Transportation Architecture Studies: Future of Earth-to-Orbit Spaceflight,” Hearings before the House Committee on Science’s Subcommittee on Space and Aeronautics, NASA Watch, 27 October 1999.

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design modifications. RLVs proposing to service the International Space Station

must meet very stringent performance and interface requirements given by the

Interface Definition Document for ISS Visiting Vehicles, SSP 50235.56 A few very

abbreviated example requirements from this document that may seriously impact

RLV designs are:57

• RLV Docking with ISS Options - specific hardware, software, and

communications interface requirements, the capability of (essentially)

maintaining a holding position for up to 34 hours outside the ISS approach

ellipsoid, compatibility of the environmental control and life support system,

and pressurization for the mating compartment. Safety considerations on-

dock at ISS also may affect design, such as the ability to withstand

micrometeoroid and orbital debris impacts and readiness for emergency

departures. The time required to transfer material from a docked RLV or an

RLV based transfer vehicle can be in excess of 9 days, a relatively long dwell

time influencing RLV consumable requirements.

• RLV Not Docking with ISS Options (Space Station Remote Manipulator

System is used to remove and replace payload module inside the RLV’s

payload bay) - specific hardware, software, and communications interface

requirements, high RLV navigational accuracy, and low error tolerances on

attitude control.

NASA Space Shuttle Replacement

NASA currently plans to replace its current, partially reusable, Space Shuttle with

either a new, Shuttle-derived launch vehicle or a “clean sheet designed” RLV,

developed and operated by industry.58 NASA has targeted 2012 for initial operations

of this system and has already invested heavily in RLV technologies and

experimental flight demonstrators, including the X-33, X-34, and X-37 programs.

NASA has spent more than a billion dollars in this area over the last few years and

56 Letchworth, Janet F, and Letchworth, Gary F, “Second Generation Reusable Launch Vehicle Servicing of the International Space Station,” AIAA Paper 2000-5141, AIAA Space 2000 Conference and Exposition, Long Beach, CA, September 19 - 21, 2000. 57 Ibid.

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intends to spend more than $4.5 billion over the next six years under its Space

Launch Initiative program to continue this work and to initiate the Space Shuttle

replacement program. One objective of this effort is to promote development of a

commercially viable launch vehicle. That is to say NASA does not wish to own the

RLV but rather to only purchase launch services at a reasonable price. NASA’s

requirement for manned spaceflight, however, may make it impossible to develop a

commercially viable system for two reasons. First man-rating a system involves

huge expenses that are not required for unmanned systems, the vast majority of all

launch vehicles. Second, the performance penalty required to design a launch

vehicle to hold humans is also huge, both in terms of additional vehicle mass,

systems and subsystems, and thus cost, as well as seriously reduced performance.

Air Force Military Spaceplane System

Due to a number of key deficiencies in its current space operational capabilities,

the Air Force Space Command component of the United States Air Force (USAF)

has documented draft needs for the capability for a militarized RLV system. In

response, the Air Force Research Laboratory in concert with NASA is currently

developing critical technologies for its Military Spaceplane System, a reusable space

system architecture to perform a wide range of missions including launch-on-

demand, reconnaissance, surveillance, satellite orbit transfer, and space defense.

As currently conceived, the Military Spaceplane System includes the Space

Operations Vehicle, a militarized reusable launch vehicle, the Space Maneuver

Vehicle, a reusable upper stage / reusable satellite bus, the Orbital Transfer Vehicle

for on-orbit asset relocation, and the Modular Insertion Stage, a low cost expendable

upper stage. From a user perspective, the Space Operations Vehicle would be

ideally as different from a civil or commercial RLV as an F-111 is from a Boeing 737,

with emphasis on operational characteristics such as mission flexibility, rapid launch,

rapid turn around, and all weather operations, rather than minimum cost launch.

58 I believe the former is more likely due to the inevitable political backlash to the recent failures of NASA’s X-33 and X-34 programs as well as the International Space Station program development woes.

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Table 1 summarizes some of the differences between the desired attributes for a

military reusable launch vehicle versus NASA’s RLV requirements.

Table 1 Military Versus NASA Commercial / Civil RLV Attributes

Development of the military spaceplane system, even at the relatively low levels

of funding the program has received, has been controversial, both inside and outside

of the Air Force. In 1996, for example, President Clinton Administration line item

vetoed military spaceplane funding, an act later ruled unconstitutional and rescinded.

Curiously, the same Administration incorporated a new DoD Space Policy in July

1999 calling for “assured, cost-effective, responsive access to space,” critical asset

protection, effective surveillance of space, timely constellation replenishment and

reconstitution, and space system protection, all hallmarks of the military spaceplane

system.59 The 1999 DoD Space Policy also gave a new U.S. perspective of space,

analogous to the high seas and international airspace, where purposeful interference

with U.S. space systems (either commercial or government) will be viewed as an

infringement of United States’ sovereign rights, and may be responded with use of

force.

59 From: Department of Defense Directive 3100.10, Space Policy, and PDD-NSC-49/NSTC-8, National Space Policy, July 9, 1999; and Cohen, William, Secretary of Defense Memorandum, Memorandum on Department of Defense Space Policy, July 9,1999

Military Spaceplane RLV Requirements

NASA Commercial / Civil RLV Requirements

Light - Medium Lift Heavy Lift Military Missions Spacelift, On-Orbit Support High Sortie Rate and Surge Limited Sortie Rate/No Surge Large Crossrange Limited Crossrange Military Operability Increased Operability (vs.

Shuttle) All-Weather Operations Some Weather Limits All Azimuth Launch Limited Azimuth Launch Full Alert Capability No Alert Capability Dispersed Operations One Operations Site

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A recently concluded congressional study warned about the vulnerability of the

United States’ critical space assets, of the potential for a “Pearl Harbor in space.”60

This report from the Commission to Assess U.S. National Security Space

Management and Organization, recommended “development of the capability to

interdict foreign satellites with minimum preparation time, i.e. military spaceplane

and reusable, maneuvering upper stages.”61 The commission was established last

year and headed by Donald Rumsfeld, now the new Bush Administration’s Secretary

of Defense. This increased emphasis in acquiring a military RLV capability might be

fueled in part by recent reports that China, Russia, and other nations have

accelerated their development of anti-satellite technology and jamming capabilities.62

This perceived need may have also been strengthened by a May 1998 temporary

failure of a commercial communications satellite, which caused nearly 90% of the 45

million pagers in the United States to go dead for almost a day.63 As the worst

failure in space communication history, this incident provided only a hint of what an

attack on U.S. space assets could offer yet serves as a valuable extrapolation

point.64

Commercial Demand

Technology Transfer Limitations

In 1999 four satellite manufacturing companies held nearly 80% of the world

market: Hughes (37%), Lockheed Martin (18%), France-based Alcatel/Aerospatiale

(11%), and Loral Space & Communication Ltd.’s SS/L unit (11%).65 However, strict

U.S. export controls on space technology have, according to some reports, severely

60 Stone, Andrea, “USA’s Dependence on Satellites Places Nation at Risk,” USA Today, January 11, 2001, p. 5A. 61 Sietzen, Frank, Jr, “Spacelift Washington: Commission to Recommend Military Space Boost, New Programs,” January 10, 2001, www.spaceref.com. 62 From: Sietzen, Frank, Jr, “Spacelift Washington: Chinese and Russian Space Researchers Designing Anti-Satellite Systems; Who Will Direct The Future of U.S. Space Policy,” February 8, 2001, www.spaceref.com; and Sietzen, Frank, Jr, “Spacelift Washington: National Security Space Needs May Drive Bush Space Policy – A Special White Paper Background Report,” January 28, 2001, www.spaceref.com. 63 Stone, Andrea, “’Space Assets’ Face Threat,” USA Today, January 11, 2001, p. 1A. 64 Canan, James W, “An Aerospace Force Takes Shape,” Aerospace America, February 2001, p. 33. 65 Friedman, Robert E., “Standard & Poor’s Industry Surveys: Aerospace & Defense,” August 10, 2000.

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hurt U.S. satellite manufacturer competitiveness over the past year or so. The

Strom Thurmond National Defense Authorization Act of fiscal year 1999 was the

Administration’s response to allegations that a U.S. aerospace company had

transferred space technology to the Chinese in violation of U.S. export controls, and

that this technology had helped improve Chinese missile capability. The Strom

Thurmond National Defense Authorization Act transferred licensing jurisdiction over

commercial communications satellite exports from the Commerce Department to the

State Department, and also levied several special space technology export

controls.66 This legislation resulted in commercial communications satellites being

treated by the United States government as more like missiles, military aircraft, or

munitions for export purposes. Export license applications for these satellites have

been subjected since early 1999 to increased scrutiny, and contract-killing delays.

This has greatly affected the entire space industry, and has seriously harmed the

competitiveness of U.S. satellite manufacturers.67 A recent article in Aerospace

America by Pamela Meredith and Sean Fleming notes, 68

“There have been reports that U.S. commercial satellite sales have

declined by approximately 40% since the licensing jurisdiction transfer.

For example, DaimlerChrysler Aerospace (now part of EADS)

indicated that it would reduce its dependency on U.S. suppliers in the

wake of the transfer.”

Of course, how much of that 40% can be attributed to a naturally slumping

market regardless of export policy is unknown. Subsequent industry complaints

prompted the Foreign Relations Authorization Act, FY00 that expedited license

application processing for export of commercial communication satellites and related

equipment to NATO countries and certain non-NATO U.S. allies.69 Industry

66 Meredith, Pamela L, and Fleming, Sean, P, “The Year in Review: Legal Aspects,” Aerospace America, December 2000. 67 Thompson, David W, ”Commercial Space Policy Needs to be Reviewed in the U.S.,” Space News, January 22, 2001, pp. 19 - 20. 68 Meredith, Pamela L, and Fleming, Sean, P, “The Year in Review: Legal Aspects,” Aerospace America, December 2000. 69 Ibid.

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complaints also prompted the Clinton Administration to introduce the Defense Trade

Security Initiatives in May 2000, to further alleviate the licensing bottleneck to certain

foreign countries.

Recent LEO Constellation Woes

The uncertainty in growth in the space launch industry is primarily due to

uncertainty in the commercial space industry as a whole. Telecommunications,

digital television, radio, paging, tracking, telephone, earth observing, and Internet

services satellites provided high demand for satellites and launches throughout

much of the 1990s. Demand for telecommunication satellite launches has slowed

considerably in the last couple of years, however. A recent trend is the downsizing

in number and scope of planned Earth communication satellite constellations due to

lower cost competition using alternative, conventional technology such as fiber optic

and copper telecommunication lines. This trend was instigated by the financial

failures of several satellite data communication ventures over the past few years.

The most infamous failure of these was also the first - Motorola’s Iridium, a $5 billion,

66 satellite low Earth orbit constellation for hand-held, dual mode phones, fixed

phones, paging, and low speed data services. Many satellite telecommunications

companies like Iridium underestimated the speed far less costly land-based wireless

phone systems spread around the planet in the 1990s. Iridium handsets that

provided global coverage but costing $3,000 couldn’t compete with very

inexpensive, more compact, cellular telephones that worked almost anywhere

business people traveled. This resulted in Iridium failing to acquire an adequate

subscriber base; the company filed for protection from its creditors under Chapter 11

United States bankruptcy code in August 1999.70 Other industry failures followed

soon after. ICO Global Communications filed for Chapter 11 about two weeks after

Iridium after failing to secure $600 million in financing commitments it had

expected.71 ICO had planned to build a $3.7 billion medium Earth orbit (MEO)

telecommunication constellation composed of 10 satellites, for portable and fixed

70 “Satellite Firm Faces Bankruptcy,” Reuters, August 27, 1999, www.wired.com/news/business. 71 Ibid.

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telephones.72 Some analysts blamed Iridium’s failure for the lack of investor

confidence in financing ICO and other telecommunication satellite constellation

ventures as well as the primary cause for lack of investment capital in new reusable

launch vehicle ventures, referring to this as the “Irridium Effect.” 73

With the first two dominos down, other ventures began to topple. Orbcomm

Global LP, who has been operating under Chapter 11 bankruptcy protection since

September 1999, is reportedly requesting permission to auction off its business.74

Orbcomm was founded in 1990 to provide two-way data communications services

for individuals, tracking of barges and truck trailers, and industrial asset monitoring.

Orbcomm currently employs a constellation of 35 satellites in low Earth orbit (LEO).

The cost of the system was estimated at $330 million in a 1997 report.75 Likewise,

Globalstar LP stopped servicing its debt in January 2001, after having found great

difficulty in acquiring subscribers. Globalstar was initially designed as a 48-satellite

constellation to provide hand-held, dual mode telephone and other communication

services for an initial investment of $2.5 billion.76 In the fourth quarter of 2000, Loral

Space & Communications Ltd. reported a loss of about $1 billion, corresponding to

their 38% stake in Globalstar.77 Orbital Imaging Corporation (Orbimage) has also

run into financial difficulty, working with an investment-banking firm to restructure its

debt, and planning on missing a March 2001 scheduled interest payment to

bondholders.78

Still, some forecasts see the multimedia, remote sensing, weather, and

navigation portions of the satellite market significantly increasing over the next

decade. Spaceway, a geostationary (GEO) constellation of 8 satellites, currently

72 Cook, William J, “1997 A New Space Odyssey,” U.S.News & World Report, March 3, 1997. 73 “The Year in Review: Space Systems,” Aerospace America, December 2000. 74 Magnuson, Stew, ”Orbcomm May Be Bound For Auction Block,” Space News, February 11, 2001, www.spacenews.com. 75 Cook, William J, “1997 A New Space Odyssey,” U.S.News & World Report, March 3, 1997. 76 Ibid. 77 Silverstein, Sam, “Loral Declares Billion-Dollar Loss on Globalstar,” Space News, February 15, 2001, www.spacenews.com. 78 Bates, Jason, “Orbimage to Miss Payment, Restructure Debt,” Space News, February 15, 2001, www.spacenews.com.

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provides fixed telephone service for developing areas, fax, and broadband

multimedia, and is thought by some to have a good shot at capturing a reasonable

Internet broadband subscriber base.79 And Teledesic, the “Internet of the Sky,” the

most blatantly ambitious LEO constellation project of all those planned in the 1990s,

still remained in a planning mode as of last year.80 Teledesic had originally planned

a $9 billion, 840 satellite, broadband multimedia LEO constellation with backers of

the ilk of Bill Gates and Craig McCaw.81 Plans for the future include a merger of

Teledesic with New ICO, formerly ICO Global Communications.

Satellite Size Trends

Marco Cáceres, a well-published space industry analyst with Teal Group,

summed up recent and predicted satellite trends in a recent article in Aerospace

America.82 He noted that the first wave of satellite constellations was the “mobile

wave,” composed of small, commercial, mobile communications satellites for LEO

constellations weighing less than 1,000 kg (2,200 lb). This wave occurred during

1997 - 1999 and was composed of about 150 satellites in the Iridium, Globalstar,

and Orbcomm constellations discussed above. The sizes of these satellites were

significantly smaller than most commercial satellites in the past – each Iridium

satellite weighed in at about 1,500 lb, Globalstar at about 1,000 lb, and Orbcomm at

approximately 100 lb. Cáceres also described the first “broadband wave”,

anticipated from 2002 to 2004. The broadband satellites will typically be much larger

sized than the mobiles; the SkyBridge, Astrolink, and Spaceway networks will be

composed of satellites weighing about 2,200 lb, 7,000 lb and 10,000 lb,

respectively.83

One satellite broadband system is already up and running. StarBand

Communications began its direct-to-home broadband Internet service in November

79 Cook, William J, “1997 A New Space Odyssey,” U.S.News & World Report, March 3, 1997. 80 “New ICO Emerges from Bankruptcy Protection,” May 17, 2000, www.teledesic.com/newsroom/articles. 81 Ibid. 82 Cáceres, Marco, “The Emerging Nanosatellite Market,” Aerospace America, February 2001. 83 Ibid.

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2000, with download speeds up to 500 kbps and upload speeds up to 150 kbps.

Their website asserts that the StarBand antenna can accommodate both their

Internet service as well as EchoStar’s DISH Network satellite TV programming, a

convenient bundling. StarBand uses one geostationary satellite to cover virtually the

entire continental United States, with Alaska, Hawaii, and Puerto Rico to be added

soon.84

Although most broadband satellite networks are planned for geosynchronous

orbit (GEO), at least one will be a low Earth orbit (LEO) constellation. The

SkyBridge broadband system will employ a constellation of 80 satellites at an

altitude of 913 miles to provide national and regional telecommunications operators

and service providers with broadband capacity, enabling them to offer high-speed,

highly-interactive multimedia services to businesses and residential users anywhere

on the planet.85 This use of LEO instead of traditional GEO for broadband is notable

as it enables SkyBridge to offer highly interactive, real-time multimedia services due

to the much shorter signal propagation time (about 30 milliseconds for SkyBridge

versus about ½ second for GEO satellites). Alcatel Space, Europe’s leading satellite

exporter, will build SkyBridge satellites. Alcatel has contracted Starsem to launch 32

SkyBridge satellites on 11 Soyuz/ST-Fregat launch vehicles, beginning in 2002. The

Boeing Company, through Delta Launch Services, will launch 40 of the satellites with

two Delta III rockets, each carrying four satellites, and four Delta IV rockets, each

carrying eight satellites.86

The $1.4 billion North American network portion of the Spaceway global

broadband satellite network is scheduled to begin operations in 2002. Spaceway

will provide two-way, high-data-rate applications such as Internet services, desktop

video conferencing, and interactive distance learning. The North American network

84 www.starband.com. 85 www.skybridgesatellite.com/news/. 86 www.skybridgesatellite.com/system/.

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will be composed of two active Spaceway HS 702 geosynchronous orbit satellites

and an in-orbit spare, all built by Boeing Satellite Systems (formerly Hughes).87

While Starband was the first to market for a two-way high-speed Internet service,

DirectPC service, a subsidiary of DirecTV, has offered a hybrid service for a few

years, using a high-speed downlink in concert with a standard dialup phone line for

the uplink.88

A host of other firms are entering or have already entered the direct-to-home and

small business satellite Internet services market, including Helius Inc., Inmarsat,

WildBlue, NetSat28, Tachyon, TeleCrossing, Ultimate Satellite, EuropeOnline, and

SeaTel, Inc.89

Some industry experts think the business prognosis for the broadband Internet

services wave looks quite positive, following the lead of GEO based direct-to-home

television services, which have been doing very well and are serving more than 10

million households in the United States.90 Video and audio streaming, especially for

live events such as sports or movies, may be a large future market.

PayForView.com, for example, has recently announced acquisition of the Internet

broadcast rights to International Soccer games, as well as agreements to offer future

live web casts of three Ultimate Fighting Championship bouts.91 A recent survey

found that a satellite Internet broadband broadcasting system appears to be the

optimal method for future digital distribution of movies from studios directly to

theaters, if pirating concerns could be mitigated. The value of a digital versus

celluloid movie distribution system to the consumer is primarily better image and

sound quality, more options for future special effects and supporting aids, and more

variety in non-movie offerings. The value of such a system to the movie studio is a

87 www.hns.com/news/pressrel/. 88 Lindsay, Clark S, Editor, Space Investing Web Site, www.hobbyspace.com/Investing/index.html. 89 Ibid. 90 Ibid.

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vast reduction in distribution and manufacturing costs, higher profit margins due to

disintermediation, the ability to hold premiere showings simultaneously in many

different geographical areas, and possibly a reduction in piracy. The value to the

movie theater is primarily better leverage of fixed assets by creating additional

revenue streams, as the Internet streaming capability could be applied for revenue

generating broadcasts of distance learning courses, business meetings, sports

offerings, and other pay per view events. However, while direct costs of the system

would be low to the consumer and movie studios, costs to the movie theater to

transition to digital projection and distribution would be large, perhaps even

prohibitively so.92

A number of industry experts predict that the wave following the broadband wave

will be composed of constellations of very small satellites or perhaps clusters of

these microsatellites, nanosatellites, or picosatellites. This emerging market is

discussed in a subsequent section.

Substitutes for Space Transportation Products & Services

“The degree of success the communications-satellite industry

achieves in competition against fiber-optic cable will be the single

most-important determinant of the future of a commercial launch

industry.”

- Bob Cole, 1989 93

Substitutes for Satellites

Fiber-optic cable, copper telecommunication lines, and cellular telephone

microwave towers are the greatest threat as substitute products to the

communications satellite industry, and thus to demand for low Earth orbit launch

91 Karasopoulos, Harry, Lazo, Horacio, Sibley, Bo, and Bee Teck Tan, Christopher, “Digital Distribution of Motion Pictures,” Research Paper for 15.567 Introduction to E-Commerce, Massachusetts Institute of Technology, December, 2000. 92 Ibid.

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services. As discussed in the prior section, a number of satellite

telecommunications companies like Iridium underestimated the speed far less costly

land-based wireless phone systems could be implemented in many different world

markets in the 1990s. Many satellite telecommunications firms probably also did not

predict the degree of cost reduction in creating this infrastructure enabled by such

large-scale network construction and technology innovation. The result was a nasty

black eye for the space industry, causing a large drop in projected LEO launch

demand over the past year and into the next few years. Even though terrestrial

networks won the first battle, they have not won the war.

Fiber optic networks offer several advantages besides some cost aspects over

satellite systems, such as higher bandwidth capacity, lower susceptibility to

electromagnetic interference (either from nature or by jamming) and tapping, and

higher overall reliability (coupled, however, with a higher susceptibility to natural

disasters or physical man-made disruption).94 Satellites offer the advantages of

higher flexibility with respect to reconfiguring the system to address changing needs

as well as applications; telecommunication satellites can fulfill a multitude of different

missions such as point-to-point, point-to-multipoint, mobile, remote, direct

broadcasting, and private networks. In addition, satellites can be more cost-effective

or even the only provider for many mobile, remote, and point-to-multipoint

communications. Examples of point-to-multipoint communications include direct

broadcasting of cable and network television, radio, and business broadcasts.

Remote telecommunications applications are especially important for satellite

systems. For example, even with the increasing availability to consumers of ground-

based Internet services using cable and telephone links, an estimated 30 million

households in the U.S. located outside of urban and suburban areas will not have

this offering for many years, if ever.95

93 Cole, Bob, The Prospects for U.S. Ventures in Space Launch, IC2 Institute, The University of Texas at Austin, 1989, pp. 98-103. 94 Cole, Bob, The Prospects for U.S. Ventures in Space Launch, IC2 Institute, The University of Texas at Austin, 1989, pp. 98-103.

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One advantage often touted of ground-based networks over satellites is the lack

of transmission delay (approximately ½ second) experienced by GEO satellites.

This delay was once considered a showstopper for Internet service protocols, but

this problem has been solved with sophisticated packet routing processors, and a

number of companies are successfully offering Internet broadband services today.

The transmission delay is not significant to most Internet users since it is of the

same order of magnitude of other system time lags. However, it can be a problem

for real-time, highly interactive applications such as multi-user gaming.96

Aside from competing with conventional, ground-based technologies such as

fiber optics and microwave transmission towers, there are few other potential

substitutes for satellites that the space launch industry relies on. High altitude, high

endurance aircraft are being developed that might be used to loiter over large cities

for long periods of time – perhaps even multiple days between landings –

substituting for a telecommunications satellite over a relatively small land area. One

such concept is Scaled Composites’ Proteus aircraft, developed primarily to serve as

a wireless transmission station with a 12-hour loiter capability. Blimps have also

been studied for these applications.

Substitutes for Launch Vehicles

Most technology research and development conducted today is directed for

launch vehicles employing liquid, solid, or hybrid liquid-solid rocket engines.

Advanced airbreathing hypersonic propulsion systems, including airbreathing and

rocket combined cycle engines are also being vigorously studied, as well as

technologies required to incorporate them into a reusable launch vehicle system. In

addition, work is also underway in developing launch assist technologies, such as in-

flight air collection and liquefaction systems, takeoff-assist sleds, in-flight propellant

transfer, etc. Although these studies could drastically alter the configuration,

95 Lindsay, Clark S, Editor, Space Investing Web Site, www.hobbyspace.com/Investing/index.html. 96 Ibid.

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performance, and operational characteristics of a resultant launch vehicle, they do

not contribute to an actual substitution for launch vehicles in general.

There are few substitutes even being considered for conventional and advanced

launch vehicles, and none are generally expected to be operational anytime soon.

In fact, the commercial and technical viability – or at least technical maturity - of

some of these concepts is hotly debated today. Only a few concepts will therefore

be discussed here.

One of the more interesting concepts is a laser-propelled launch vehicle concept

that uses a pulsed laser beam from a ground-based laser to heat the air on the

specially shaped underside of the “Lightcraft.” The rapidly heated air creating a blast

wave that propels the Lightcraft upwards. Numerous flight tests of subscale models

have been conducted in New Mexico, with an altitude of 233 feet reached by a 1.8

ounce Lightcraft model using a 10 kW pulsed carbon dioxide laser.97 The firm

Lightcraft Technologies was formed in February 2001 to commercialize this

technology, and plans to launch nanosatellites into orbit within 5 years,98 a very

ambitious schedule considering the formidable challenges remaining to be worked

out.

Electromagnetic powered rail guns have been examined for either rocket launch

assist or as an independent launch system for small payloads having the very

unique capability of surviving 30-50 g accelerations and very high heating.

Even more ambitious ideas have been pursued such as a tower spanning from

the earth’s surface beyond geosynchronous orbit altitudes (some 22,500 miles

away!), and tethers of like magnitude that either reach down into the Earth’s

atmosphere to grab a payload and pull it into orbit, or are anchored to the Earth’s

97 www.lightcrafttechnologies.com/news.html. 98 Lindsay, Clark S, Editor, Reusable Launch Vehicle News Web Site,

www.hobbyspace.com/Links/RLVNews.html.

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surface and employ some sort of elevator-like system to carry payloads into orbit.99

Buckytubes, tubular microscopic strings made of carbon atoms, and having an

extremely high strength-to-weight ratio, have been considered as a viable future

construction material for the anchored tether concept.

NASA, universities, and private citizens have also studied some theoretical

physics concepts that may someday replace launch vehicles or more efficiently

utilize existing space vehicles. These concepts include quantum teleportation,

wormholes in space, and the elimination of momentum.100

Emerging Markets

Motivated especially by the recent souring of the LEO communication satellite

market, reusable launch vehicle developers are carefully scrutinizing other facets of

the launch market. Several yet untapped commercial markets may increase

demand for space transportation services in the future. Space tourism, for example,

has been extensively studied with some supply and demand forecasts showing a

potentially lucrative market – but only enabled by launch costs of a fraction of those

of today’s systems. Micro-, nano-, and picosatellites may offer a relatively

inexpensive architectural option to the satellite industry in the future, perhaps

enabling a resurrection of demand for LEO launches. Another area of high market

potential is in very fast freight services where a company would provide nearly global

package delivery in a mere few hours rather than overnight using RLVs with

suborbital trajectories. Such an offering could obviously be extended to a suborbital

passenger service. Other possible markets for RLVs are to launch payloads for

space solar power, space-based manufacturing, satellite-aided agriculture, and even

advertising and entertainment. Two of these emerging markets for launch services,

microsatellites and space tourism, are examined in more detail below.

99 Don’t hold your breath. 100 Beardsley, Tim, “The Way to Go in Space,” Scientific American, February 1999.

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Microsatellites

In addition to the trends of LEO communications satellites becoming smaller and

GEO satellites becoming larger, an emerging market in pico-, nano-, and

microsatellites has appeared. Although in the paragraphs below I’ll take some

license in sometimes referring to all three classes of very small satellites (micro-

nano- and picosatellites) simply (and unimaginatively) as “very small satellites”,

these satellite classes are differentiated by their mass, often as: picosatellites < 1 kg

(2.2 lb), nanosatellites < 20 kg (44 lb), and microsatellites < 200 kg (440 lb).101

Miniaturization technologies have enabled commercial satellites to shrink

considerably. Instead of the traditional few thousand pounds per satellite,

constellations of microsatellites today are made up of individual satellites weighing

less than a few hundred pounds each. One good example is Orbcomm that, as

discussed above, currently employs a constellation of 35 satellites in low Earth orbit

to provide commercial communications and monitoring services. Each Orbcomm

satellite weighs in at a little less than 100 pounds. And however as impressive this

was when first deployed just a few short years ago, Orbcomms may seem like

behemoths relative to some future communication and imaging satellite

constellations.

According to Cáceres,102 launches of 24 nanosatellites into Earth orbit have been

attempted since 1990, with nearly half of these launched in 2000 alone. Some of the

builders and/or owners are Weber State University, Air Force Academy, Orbital

Sciences, Interferometrics, GE Americom, Amateur Radio Satellite organization,

Amsat-North America, Japan’s Institute of Space and Astronautical Science,

National Autonomous University of Mexico, Technical University of Berlin, German

Space Agency, Santa Clara University, Arizona State University, Stanford University,

China’s Tsinghua University, University of Rome, and many others. More than half a

101 There doesn’t appear to be a clear consensus in the literature over the exact value of these masses, but the order of magnitude is consistent. 102 Cáceres, Marco, “The Emerging Nanosatellite Market,” Aerospace America, February 2001.

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dozen additional nanosatellites built or owned by eight other American universities

will likely be launched in 2001 or 2002.103

While miniaturization has made micro-, nano- and picosatellites feasible, another

reason for the recent growth in nanosatellite numbers is the recent availability of

relatively low cost ELVs. One of these is the United States Air Force’s Minotaur,

which offers orbital and suborbital versions, and is made of its stockpiled Minuteman

II ICBM engines and components of Orbital Science’s Pegasus XL booster. The

Minotaur had its first two launches, both successful, in 2000. Another is Ukraine’s

Dnepr, which is based on an adaptation of the SS-18 ICBM, a good use of the 150

missiles otherwise scheduled for destruction as part of the START Treaty.104 Russia

is also offering new low cost launchers, the Shtil and Start 1.105 At essence,

converted ballistic missiles (many slated to have been destroyed as a result of

treaties), some of these new low cost ELVs are capable of launching a number of

nanosatellites in addition to a larger primary payload for total per launch cost of

about $10 million.106 This is far less than the costs of older, more established

launchers such as Orbital Science’s Pegasus or Taurus ELVs, and it enables launch

fees for some nanosatellites of roughly a few hundred thousand dollars or less.

Besides universities, clubs, and well-established national space programs, past

microsatellite successes coupled with new low launch costs are opening the doors

for new customers to enter the space marketplace. Vietnam’s National Center for

National Science and Technology recently announced that, working with the British

Surrey Space Research Center, it would build its own microsatellites within the

decade to monitor Vietnam’s natural resources and environment.107 Algeria is also

103 Ibid. 104 www.kosmotras.ru/welrus2.htm. 105 Cáceres, Marco, “The Emerging Nanosatellite Market,” Aerospace America, February 2001. 106 Ibid. 107 “Vietnam Working With Surrey To Build Microsats,” SPACEDAILY, February 14, 2001, www.spacer.com/news/vietnam-01a.html.

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entering the microsatellite arena, working with the Surrey Space Research Center,

to design, build, launch, and operate an Algerian microsatellite.108

With the ranks of small satellite manufacturers growing, small satellites will likely

become more and more inexpensive. Not long after successfully orbiting and

operating an imaging microsatellite, the Tsinghua University Aerospace Center

announced their intent to initiate a commercial enterprise. The primary revenue

stream for the new business would be sales of microsatellites and a secondary

revenue stream would come from selling images from its own orbiting

microsatellites.109 In doing so Tsinghua University will compete with the growing

ranks of small satellite manufacturers such as AeroAstro, Amsat, Surrey, and Orbital

Sciences. Tsinghua University also plans to develop and launch its first

nanosatellite this year.

Very small satellites have been traditionally launched as secondary payloads

“piggybacked” onto the primary payload, in an economical exploitation of a

launcher’s excess capacity. A recent trend in the microsatellite market, however, is

for a number of pico-, nano-, or microsatellites to be combined with a “host platform”

or “mothership” that transports each satellite to its preferred orbit insertion point.

This host platform may either be a mothership satellite or a special bus or

expendable orbital transfer vehicle. This approach is particularly useful for

constellations where neighboring orbits are nearby. There are some efforts to

standardize these low cost host platforms to be compatible with a number of

different launch vehicle interfaces. One such host platform is the Multiple-Payload

Adaptor (MPA) built by the One Stop Satellite Solutions Company that integrates

multiple satellites of 23 kg (50.6 lb) mass or less. AeroAstro’s SPORT (Small

Payload Orbit Transfer) is a competing host but with considerable more on-orbit

maneuverability and hence mission flexibility. Last year Aerospace Corporation

108 “Surrey Wins Algerian Microsatellite Contract,” SPACEDAILY, August 17, 2000, www.spacer.com/news/microsat-00t.html. 109 Long, Wei, “China Microsat Performs Well; Nanosat is Next,” SPACEDAILY, August 22, 2000, www.spacedaily.com/news/microsat-00u.html.

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orbited two picosatellites, each about the size of a cigarette pack and weighing 0.25

kg (0.55 lb), using the Orbiting Picosat Automated Launcher (OPAL) constructed by

students at Stanford University.110 SpaceDev Inc. has also announced their intent to

develop a prototype orbital Maneuvering and Transfer Vehicle (MTV), test firing a

small hybrid liquid-solid rocket engine in November 2000.111

As these host platforms integrated become more available and more widely

used, we may see a future trend of these integrated satellite payload packages

becoming the primary payloads for ELVs rather than the usual current practice of

smaller numbers of very small satellites being secondary, piggybacked payloads.

Industry expert Marco Cáceres from the Teal group asserts that these developments

will ease the deployment of pico-, nano-, and microsatellites in a very important

way:112

“These (host platforms) could well be revolutionary types of

technologies, in terms of the way they may expand both the number of

satellites that could be launched and the number of players who

compete in the satellite market. They could enable nanosatellite

launches to increase from the current ten or so satellites per year to

hundreds. If this happens, nanosatellites, along with microsatellites

and picosatellites, could be the next major driver of the satellite market,

perhaps during 2005 - 2010.”

In his article Cáceres states further that: 113

“Under ‘conventional’ satellite market forecasts, which largely do not

account for nanosatellites, the number of satellites projected to be built

and launched over the next 10 years is roughly 1000, or an average of

100 satellites per year. With such low numbers, it is difficult to justify

investing in costly and somewhat risky reusables.”… “With an

110 “Picosatellites: Small is Beautiful,” The Economist, February 4, 2000. 111 “SpaceDev Successfully Fires First Rocket Motor,” Business Wire, November 16, 2000. 112 Cáceres, Marco, “The Emerging Nanosatellite Market,” Aerospace America, February 2001. 113 Ibid.

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energized micro-, pico- and nanosatellite market, the number of

satellites could conceivably grow exponentially and create the kind of

launch volume needed to make RLVs both profitable and affordable.”

The above assessments are important. Cáceres observes that the host

platforms for very small satellites could very well be a disruptive product, a product

that triggers revolutionary changes by greatly increasing the number of very small

satellites launched as well as the number of competitors in the satellite marketplace.

He also contends that this disruptive product may enable RLV commercial viability.

Thus, host platforms may bring disruptive changes to both the satellite and the

launch services worlds. A capable114 RLV is itself a disruptive product, one that will

revolutionize the space launch industry. Thus, we may find that in this situation one

disruptive product enables a second, and perhaps a third as outlined below.

Microsatellite Clusters

The Space Vehicles Directorate of the Air Force Research Laboratory (AFRL)

and the Air Force Office of Scientific Research have both invested heavily in

microsatellite technology development, and are especially interested in missions

involving clusters of microsatellites that fly in formation in nearby orbits. AFRL plans

to place a cluster of three experimental microsatellites in orbit in either 2003 or 2004

under the Technology Satellite of the 21st Century, or “TechSat 21”, program.115

This program will examine the feasibility of using clusters of small, independent

satellites (about 120 kg or 264 lb each) to replace larger, single satellites for both

military and commercial applications. Basic research is being conducted under

TechSat 21 in such areas as precision formation flying, collaborative control, sparse

aperture sensing, advanced thermal management, micropropulsion, and

microelectro-mechanical systems (MEMS). MEMS technological progress is a

particularly big driver of micro-, nano-, and picosatellite development in general, and

is currently receiving much attention by space researchers.

114 One that delivers the promised single order of magnitude decrease in launch costs and multiple orders of magnitude increase in reliability and safety. 115 Wilson, J. R, “Satellite Clusters Reshape Space Plans,” Aerospace America, November 2000.

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Replacing large single satellites with microsatellite or very small satellite clusters

is analogous to the migration from mainframe to networked computers, according to

AFRL program managers, and has the potential to significantly reduce mission costs

and significantly increase flexibility. Microsatellite116 clusters could theoretically

provide high versatility in communications and sensing applications, allowing large

changes in aperture by merely changing spacing between the satellites. This would

enable on-demand, reconfigurable missions for the military, providing valuable

mission flexibility. Microsatellite clusters should also be far less vulnerable than their

single satellite cousins; if one fails for whatever reason its function could be replaced

either by an on-orbit spare, a quickly launched spare, or the remaining elements in

the cluster. The latter option might result in somewhat degraded performance due to

decreased aperture size yet the system would remain functional.117 Microsatellite

clusters may also offer a much less expensive opportunity for performing upgrades.

Engineers imagine a highly adaptable, networked system that can be reprogrammed

with the replacement of only one or a few microsatellites rather than the entire

system. Last, but perhaps most significantly, microsatellite clusters may result in

large cost reductions for both users and satellite manufacturers due to economies of

scale. Microsatellite clusters thus have the potential to be a disruptive technological

innovation.

Space Tourism

The concept of high volume space tourism has been studied extensively.118

Many studies have shown vast, untapped national and world markets, with tens of

116 Or nanosatellite or picosatellite clusters. 117 Wilson, J. R, “Satellite Clusters Reshape Space Plans,” Aerospace America, November 2000. 118 See for example:

Mueller, Hartmut, and Elingshausen-Bluhm, Martin, “Space Tourism - New Business Opportunities or a Remaining Fiction?” IAF Paper 98-1503, 49th International Astronautical Congress, Melbourne, Australia, September 28 - October 2, 1998;

Penn, Jay P, and Lindley, Charles A, “Space Tourism Optimized Reusable Spaceplane Design,” Conference on Next Generation Launch Systems, Space Technology & Applications International Forum, STAIF-97, Albuquerque, NM, January 26-30, 1997;

Ashford, David and Collins, Patrick, Your Spaceflight Manual – How You Could Be A Tourist in Space Within Twenty Years, Headline Book Publishing Plc, London, U.K., 1990;

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millions of potential space tourists all willing to pay significant percentages of their

yearly income for the trip of their lifetime. In several of these imaginative studies

giant fleets of RLVs wisk tourists hourly to giant orbital hotels, complete with space-

based sports arenas, in scenes reminiscent of The Jetsons.119 Other studies portray

a more modest level of consumer demand, yet sufficient to create a lucrative

industry. All, however, are enabled only with RLV launch costs of a fraction of those

of today’s systems.

Of all the possible emerging markets for RLVs, space tourism is the most

prominent and perhaps the most controversial. Receiving fervent support from a

number of private citizens, professional associations, and Internet web sites, space

tourism is heralded by many as the key emerging market segment that will create

enough demand to enable profitable RLV development. With an investment of many

billions of dollars, an orbit capable reusable launch vehicle could conceivably be

developed, allowing orbital space tours to be offered from the start of commercial

operations. However, due to the more probable evolutionary nature of vehicle

performance capability due to both technology development and investment

constraints, a more likely scenario is for a gradual expansion of space tour offerings

from suborbital to orbital. In this model the first commercial offerings will be brief

suborbital tours with duration of perhaps just a few minutes. As the launch vehicle’s

reliability and safety becomes established, media attention and word of mouth will

increase demand and RLV service growth. Increases in revenues will allow for

additional capital investments in research, development, and hardware, which in turn

will increase RLV performance resulting in longer and longer suborbital tours.

Eventually demand for orbital tours will prompt enough investment to develop an

orbit capable RLV that is a derivative of the successful, proven suborbital version.

Reynerson, C, “A Space Tourism Platform Model for Engineering and Economic Feasibility,” AIAA

Paper 2000-5218, AIAA Space 2000 Conference, Long Beach, CA, 19-21 September 2000; Fukada, Takahiro, “Japan Plans to Make Space Tourism Science Fact,” Houston Chronicle,

January 4, 2001. 119 A popular children’s cartoon series that first aired in 1962.

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Expansion in the on-orbit market will take place from initial multi-orbit tours each of a

few hours120 to extended stays, perhaps in some sort of space hotel.

Mueller and Elingshausen-Bluhm121 propose a similar incremental, long-term

development of the space tourism industry in a 1998 conference paper, a rational

and relatively conservative approach compared to some industry advocates. First, a

suborbital RLV is developed, tested, and then used to open the suborbital tourism

market. The RLV is later developed further into an orbit-capable system. While in

its initial operational stage, a hotel module is attached to the International Space

Station in the 2015 – 2020 timeframe, allowing for multi-day on-orbit stays of limited

capacity. A separate 4000 unit orbital hotel is concurrently constructed and

completed in 2020, accompanied by a large increase in “spaceliner” fleet size.

Subsequent enlargements to the hotel increase its size and capacity, leading to a

mature space tourism industry by 2030.122

In the same work, Mueller and Elingshausen-Bluhm123 also summarize and

examine the results of a number of prior market research studies of space tourism.

Past surveys and market analyses have estimated worldwide market potential for

space tourism as high as $25 to $50 billion annually, corresponding to hundreds of

RLVs transporting several million passengers to and from orbit each year. Price

estimates in these studies range from on the order of $5,000 per trip to over

$100,000. Segmentation of the market indicates consumers with high and very high

incomes are the most likely to be able afford the steep initial prices for space tours.

Wealthy space enthusiasts, extreme outdoor adventurers, and experiential

adventurers will likely be the lead users. Later, as the reliability and safety record is

established and the RLVs are made more comfortable, they will be followed by

luxury tourists. Mueller and Elingshausen-Bluhm note that current luxury cruise

120 It takes about 90 minutes for a spacecraft to circle the planet in a low Earth orbit. 121 Mueller, Hartmut, and Elingshausen-Bluhm, Martin, “Space Tourism - New Business Opportunities or a Remaining Fiction?” IAF Paper 98-1503, 49th International Astronautical Congress, Melbourne, Australia, September 28 - October 2, 1998. 122 Ibid. 123 Ibid.

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tours today successfully charge nearly $100,000, and that about half that amount is

sometimes charged today for certain extreme adventures.

One likely error in some prior market research studies of space tourism is the

implicit assumption that just because a polltaker responds that she would

hypothetically pay, for example, $20,000 for a ticket for a three-hour space tour, it

may be unlikely she would actually do so when offered the opportunity. In reality,

perhaps only a fraction of respondents would actually do so, especially in the

formative years of space tourism where vehicle reliabilities and safety risks are still

being established. It seems that many people consciously or subconsciously enjoy

considering themselves as adventurers, particularly in the hypothetical context of a

poll.124

A number of factors will challenge space tourism market diffusion, perhaps

slowing it more than many advocates believe. First, the service is unfamiliar and

unlike any other tourism offering. Although sure to pique the imagination, the

concept of leaving the Earth’s atmosphere behind may provide a psychological

stumbling block for some consumers, especially, perhaps, the older generations who

experienced the Apollo program, and equate spaceflight as a unique and risky

occupation for an elitist astronaut corps. Then too, knowing that the deadly vacuum

of space resides only a breached hull away may be frightening; movie and television

productions have often shown us such dire consequences. Several times each year

the U.S. public is exposed to real televised images of expensive, complex, and

modern expendable launch vehicles exploding on their television screens. People

“know” launch vehicles are experimental, risky, and hazardous. I still hear the old

phrase, “It doesn’t take rocket science to do this,” almost every week. These beliefs

are even more firmly entrenched by those recalling the disturbing, unforgettable

visual scenes of the Space Shuttle Challenger disaster.

124 Indeed, much of American advertising exploits this tendency. Consider, for example, commercials for sport utility vehicles (SUV) that exclusively depict these vehicles off-road, conquering mountains and undertaking other outdoor adventures. Yet it is well known that less than a couple of percent of all SUV owners in the U.S. actually ever leave a paved road with their vehicles.

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Because of this attitude, market diffusion of space tourism is critically dependent

upon the industry’s safety and reliability records, not only for customer demand but

also for financing. Note it is the industry’s record, rather than merely one particular

company’s, that is so crucial for swaying public opinion. Hence it may be in the best

interests of the industry to somehow establish and police some sort of industry

safety and reliability standards, even beyond those imposed by the Federal Aviation

Administration’s licensing and certification processes. Such restrictions should be

considered for even unmanned experimental RLV concepts that will be later evolved

into passenger variants. One important study on space tourism stated that the

requirement for overall safety will need to be at least 0.9999, that is to say a

maximum of one accident involving fatalities out of every 10,000 flights. This overall

safety is roughly 100 times that of the Space Shuttle (usually attributed to be 0.993,

or 7 catastrophic accidents for every 1000 flights), and the same target NASA has

set for its 2nd generation reusable launch vehicle, which intends to develop a Space

Shuttle replacement with initial operations in 2012.125 As a comparison, current

expendable launch vehicles typically have demonstrated reliabilities ranging from

only .90 to .98 (or from 2 to 10 catastrophic accidents for every 100 flights). The

eventual goal is for at least the safety of a modern passenger jet with its

demonstrated reliability of about .9999995 (1 catastrophic accident for every 2

million flights).

Public acceptance of a new space tourism business based on a new RLV

concept will be obviously heavily influenced by the reputation of the company

offering the service. As noted above, this reputation is influenced by the company’s,

as well by the overall industry’s, safety and reliability records. Legitimacy concerns

could also be a factor, particularly if a small entrepreneurial firm with no established

brand image and little manufacturing or integration experience developed the RLV.

Some legitimacy concerns could be mitigated if the small entrepreneurial firm

125 “2nd-Generation Rocket Program Opens Doors at Marshall Center,” Federal Technology Report, January 25, 2001.

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contracts to established industry figureheads for at least all critical systems and

subsystems, if not integration as well. RLV developer Kistler Aerospace is currently

following this strategy, contracting with Northrop Grumman, for example, to fabricate

vehicle structures. Other legitimacy issues that could also be significant are

discussed in Chapter 6.

Space tourism enthusiasts acknowledge the existence of the “giggle factor” when

discussing space tourism with the general public, but even more so with industry

insiders. However, predicting the availability of advanced technology is notoriously

difficult, often much to the amusement of hindsight observers. Sometimes it less

amusing than disappointing; I, for one, had been looking forward to having androids

clean my house, cook my meals, and do my laundry while I “tooled around” the skies

in my convertible plane-car, all by the turn of the century. This, and many, other

remarkable innovations were promised by innovators and various technology seers

just a few decades ago. Under-exaggerations of technology advance are as

common as over over-exaggerations it seems. “If man was meant to fly, he would

have wings” so goes the common colloquial saying. In 1900, your great-grandfather

may have uttered this and laughed at the thought of man being able to fly, yet in

1903 the Wright Brothers shattered that paradigm with their first and subsequent

successful powered flights at Kittyhawk, North Carolina. As Ashford points out in

Your Spaceflight Manual, 126 if your great-grandfather had observed the Wright

Brothers’ more than 100 experimental flights in 1904, not one with a flight times

lasting more than five minutes, your great-grandfather may have laughed again, this

time at the thought of a commercial airline passenger service being established

within his children’s lifetimes. Yet 10 years later the world’s first scheduled airline

passenger service was established to fly customers from St Petersburg to Tampa,

Florida.

Drastically lower launch costs than those of today are also critical for this industry

to go far. According to NASA’s 1998 General Public Space Travel and Tourism

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report, precursory business models show that profitability of large-scale space

tourism businesses require launch costs in the range of $1 to $2 million per flight.127

This is 200 to 500 times less than current Space Shuttle launch costs and even a

factor of ten less than NASA’s goals for its 2nd generation reusable launch vehicle,

currently planned for initial operations in 2020.128 Many critics of space tourism point

out this level of costs may be unattainable for another 30 or more years; after all,

launch costs have not decreased even a fraction of this amount over the past 20 or

30 years. On the other hand, this imposing problem doesn’t mean a smaller-scale

tourism business couldn’t be profitable, particularly if the vast majority of any

required technology maturation happened to be funded by the government.

Of course a plethora of other challenges too numerous to mention here would

have to be overcome for RLV space tourism to become mainstream (e.g. RLV or

space hotel design for protection from solar flares, micrometeorites and other space

debris, artificial gravity and/or space sickness mitigation, certification, regulation,

insurance, and environmental policy).

A common denominator in many of these studies is the very low estimated

development cost for a very reliable, passenger carrying, orbit capable RLV, and in

some cases for the space hotel facilities as well. Some studies assume the entire

development costs including technology R&D (research and development) is

accomplished by commercial enterprises alone, while others assume the

government would pay for any required R&D. Many studies argued for venture

profitability assuming a cost of capital of around 6%, approximately the rate of a

government-backed loan. Eilingsfeld and Schaetzler argue persuasively that these

assumptions are not necessarily valid, that with the past history of government

sponsored RLV development programs, the private sector is essentially on their

126 Ashford, David and Collins, Patrick, Your Spaceflight Manual – How You Could Be A Tourist in Space Within Twenty Years, Headline Book Publishing Plc, London, U.K., 1990. 127 O’Neil, Daniel Compiler, et al., General Public Space Travel and Tourism - Volume 1: Executive Summary, NASA Report NP-1998-3-11-MSFC, March 1998.

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own.129 In their study, Eilingsfeld and Schaetzler applied the standard financial

CAPM (Capital Asset Pricing Model) to an example space tourism venture that had

assumed a 6% cost of capital. Calculating the business risk index using recreational

and luxury goods industry comparables led to an estimated cost of capital of 17.6%

and economic infeasibility of the venture. Even this rate, I believe is intuitively low,

perhaps out of sync with real and perceived technological, programmatic, and

market risk. Regardless, Eilingsfeld and Schaetzler’s work makes the following

three valuable points:

• The cost of capital for a RLV space tourism venture is likely to be much

higher than the frequently assumed cost of capital range of 6 - 7%.

• Several past space tourism studies showing emphatic profitability are actual

negative net present value investments.

• Smaller, incremental space tourism projects (suborbital RLV tours) with their

relatively small initial investment requirements are much more likely to be

profitable.

A number of space tourism reusable launch vehicle concepts also suffer from

design integrity or incorporate unrealistically ambitious, unprecedented technology

maturation schedules. Penn and Lindley,130 in contrast, present an excellent

synopsis of a two-stage-to-orbit RLV design, focusing on the true critical design

drivers – operability and operational costs, reliability, safety, and vehicle turnaround

time - all via significant up-front, designed-in robustness and margin at the expense

of performance and development cost. With an excellent overview of the

technological drivers and with estimates for research, development, testing, and

evaluation of $10 billion in 1997 dollars, Penn and Lindley appear to have one of the

most realistic designs in the literature.

128 This date varies in the literature, quoted as 2012 as recently as December 2000 by NASA Marshall Space Flight Center program managers. This latest date is from “2nd-Generation Rocket Program Opens Doors at Marshall Center,” Federal Technology Report, January 25, 2001. 129 Eilingsfeld, F, and Schaetzler, D, “The Cost of Capital for Space Tourism Ventures,” IAA Paper IAA-00-IAA.1.4.02, Symposium on Economics and Commercialization of Space Activities, 51st International Astronautical Congress, Rio de Janeiro, Brazil, October 2-6, 2000.

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Suborbital RLV Space Tourism Ventures

The Civilian Astronauts Corps (CAC, also known as Advent), located near

Houston, Texas, wanted to build a floating RLV, tow it out into the Gulf of Mexico,

tether it to the bottom of the sea, and launch it on a suborbital trajectory with a

maximum altitude of 70 miles. Recovery of the reusable launch vehicle would have

also been in the ocean, horizontally in the manner of a seaplane. CAC attempted to

find 2,000 people willing to place a deposit for the four-minute suborbital flight at

$5,000 each, to help finance system development.131 The company succeeded in

collecting about $200,000 from 62 prospective passengers but went out of business

in April 1999.132 Another entrepreneurial RLV developer, Vela Technology, is

working with Seattle-based Zegrahm Expeditions to attempt to find customers willing

to pay a $5,000 deposit for suborbital flights costing $98,000 per seat.133

Interestingly, both companies acquired full-paying customers without even a vehicle

to show them. An even more ambitious space tourism venture is being planned by

the Japanese Rocket Society, a private organization that intends to establish a joint

venture to develop a prototype RLV in 2004 with the help of a number of prominent

Japanese entities, including Mitsubishi Heavy Industries Ltd, Sharp Corporation,

Fujitsu Ltd, and Nissan Motor Company, Ltd. The Japanese Rocket Society plans to

construct a fleet of 52 reusable launch vehicles and complete more than 1,200 test

flights by 2015.134

More “down-to-Earth” companies include SpaceX of Orlando, Florida, and Space

Adventures of Fairfax, Virginia, who intend to offer short, zero gravity airplane flights

similar to those used by NASA to train astronauts. Two well-known, experienced

130 Penn, Jay P, and Lindley, Charles A, “Space Tourism Optimized Reusable Spaceplane Design,” Conference on Next Generation Launch Systems, Space Technology & Applications International Forum, STAIF-97, Albuquerque, NM, January 26-30, 1997. 131 “Mayflower Sells Out Seven Flights,” October 27, 1998, SPACEDAILY, www.spacer.com/spacecast/news/mayflower-98c.html. 132 “Space Tourism Company Shuts Down,” SpaceViews, April 13, 1999, www.spaceviews.com/1999/04/13a.html. 133 Hagood, Kathy, “Florida’s Future in Space: Tourism Companies Ready to Go,” Florida Today, 1997, www.flatoday.com/space/explore/special/floridasfuture/.

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adventure travel companies, Omega World Travel and Quark Expeditions, back the

latter company, who also offers rides on a Russian MiG-25 fighter aircraft.135 A

number of other similar adventure travel companies (e.g. Spacetopia, Incredible

Adventures)136 exist today that offer a combination of terrestrial adventure trips, zero

gravity airplane flights, and future suborbital space tours.

Space Station Tourism

Space tourism has been featured prominently recently in the media. United

States businessman and former NASA rocket scientist, Dennis Tito, had intended to

visit the Mir space station sometime in 2001, negotiating a deal worth about $20

million through MirCorp, a Holland-based firm established to initiate commercial

ventures on board Mir. (According to CNN, two tourists paid millions of dollars each

to visit Mir a number of years ago when the Soviet government controlled it.137)

Tito’s trip to Mir was cancelled in late 2000, however, upon the decision to abandon

Mir and initiate a destructive reentry into the Earth’s atmosphere in February of

2001. Undeterred, the Russians have offered Tito a trip instead to the Russian

module attached to the Alpha segment of the International Space Station in 2001 as

a tourist. The price: about $20 million to Russian coffers. Reactions to this

announcement have varied considerably although U.S. Representative Ralph Hall,

member of the House Science Committee, recently complained to NASA about

NASA’s apparent open consideration of the trip.138 Citing the increased risk to the

ISS of having a private citizen aboard, Hall called for NASA to clarify its position.

Some argue that the precedent has already been set by the trips Ohio Senator John

Glenn, Utah Senator Jake Garn, and Florida Congressman Bill Nelson have taken

aboard the Space Shuttle at the cost to U.S. taxpayers of millions of dollars.

Although sooner than intended, NASA chief Dan Goldin has more than once stated

134 Fukada, Takahiro, “Japan Plans to Make Space Tourism Science Fact,” Houston Chronicle, January 4, 2001. 135 Hagood, Kathy, “Florida’s Future in Space: Tourism Companies Ready to Go,” Florida Today, 1997, www.flatoday.com/space/explore/special/floridasfuture/. 136 www.spacetopia.com & www.incredible-adventures.com/dearadv.html. 137 “U.S. Tourist Plans to Visit Mir by 2001,” CNN.com, June 19, 2000. 138 Berger, Brian, “Senior Democrat on House Science Committee Sounds Note of Opposition to Tito Flight,” Space News, February 8, 2001.

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NASA’s intent to eventually turn the International Space Station over to private

enterprises, even to be utilized as a space hotel.139

Mr. Tito is not MirCorp’s only customer eyeing the ISS. NBC also had plans with

MirCorp – a television program called, “Destination Mir,” where contestants were to

compete for a visit to the Mir space station. Brainpower TV, a German television

company, is also working with MirCorp for the International Space Station visits for

winners of their own competition.140

“Fast Freight” or Fast Package Delivery

“Fast Freight” or Fast Package Delivery refers to the nearly global delivery of

packages in a mere few hours rather than overnight, a high-speed extension to

today’s one- and two-day delivery services that employ conventional jet aircraft.

Candidate goods for this market include biological specimens and transplant organs,

urgent and original documents, fresh delicacies, high-value inventory items, and

critical manufacturing and assembly-line components.

Fast Package Delivery first appears in the literature in the 1994 NASA - Industry

Commercial Space and Transportation Study that claimed the fast freight market

could in itself economically justify development of an RLV system.141 This study

proposed customer fees ranging from $100 to $1,000 per pound and market

volumes ranging from 10 to 50 million pounds per year. Some follow-on studies

have supported the economic viability of a suborbital RLV system to carry fast

freight, although emphasizing the large uncertainty in market size.142 In a 1999

study, however, Martin et al. showed a bifurcation exists in the market and system

requirements for Fast Package Delivery, with two separate flight system solutions

139 “NASA Chief Calls for Space Commercialization,” Reuters, 25 September 1999. 140 Young, Kelly, “MirCorp Giving Up on Russian Station, Concentrating on Alpha,” Florida Today, December 13, 2000. 141 Commercial Space Transportation Alliance, Commercial Space and Transportation Study Final Report, April 1994, NASA Report No. N95-25747. 142 Personal discussions with representatives from The Boeing Company and Econ, Inc., Kirtland Air Force Base, New Mexico, 1997.

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best serving the market’s and customers’ needs.143 The first system, for routine

scheduled service, would be a Mach 2 – 3 aircraft similar to the recently cancelled

High Speed Civil Transport. The second system, for on-demand chartered flight,

would either be an RLV or a hypersonic cruise vehicle (presumably, a scramjet-

powered Mach 6 aircraft) having the capability for operating out of conventional

airports, with subsonic loiter, and quick turn around times. Furthermore, Martin et al.

state that the business case for Fast Package Delivery can not support development

of the RLV or hypersonic cruise vehicle due to the low production level and high

amortization costs, suggesting instead joining the Fast Package Delivery and space

transportation markets.144

Initial introductions to the concept of Fast Freight Delivery often provoke vigorous

skepticism. While the mere few, small studies on this subject to date should not be

interpreted as concrete proof that a viable Fast Freight business case exists for

RLVs or hypersonic cruise vehicles, they certainly point to an interesting potential

that needs further study. It is an error, however, to dismiss this market out of hand;

in its conceptual form, many also dismissed Federal Express’s overnight delivery

service,145 yet it produced revenues exceeding $8 billion per year by the mid-1990s.

Solar Power

Space based solar power generation offers a vast potential for an alternative,

“clean,” effectively inexhaustible energy source. Unlike a ground based solar power

system that is limited by night and inclement weather, a space solar power system

would have the capability to generate energy continuously. In addition, without the

filtering effects of the atmosphere a space-based solar power system would receive

significantly more solar energy than a ground based system. A large-scale solar

power plant on Earth would furthermore be restricted to land availability, whereas a

143 Martin, Jared, et al., “Scheduled vs. On-Demand Service for a Fast Package Delivery System,” Conference on Next Generation Launch Systems, Space Technology and Applications International Forum, STAIF-99, Albuquerque, NM, January 31 - February 4, 1999. 144 Ibid. 145 Indeed, if one believes the legendary story circulating in graduate management schools today, the founder of Federal Express, Frederick W. Smith, Jr., received a “C” grade in his MBA business plan course for the overnight delivery concept due to a “nonexistent market”.

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space-based system would not. One key issue that may affect the feasibility of

space based solar power plants is the transfer of power to the Earth’s surface. Most

studies have examined either microwave or laser beaming. The jury is still out,

however, on the feasibility of either option due to atmospheric attenuation and the

possibility that this attenuation could contribute to pollution or even global warming.

A second key issue is the extremely high cost of space transportation for proposed

solar power systems, some of which are several orders of magnitude heavier than

today’s satellites. The literature indicates that reducing launch costs to at least

1/20th of today’s prices will be necessary to enable economic viability of a very

technologically advanced, orbit-based, solar power system.146

Satellite Salvage: Recovery, Repair, Maintenance, and Repositioning

While not likely to be a large market, satellite salvage may nonetheless be an

important future market. Salvage operations might begin with the on-orbit recovery

of a satellite, followed by repair or maintenance, and then either the return to Earth

or the reinsertion of the satellite into a new orbit. An RLV working in concert with a

reusable orbital transfer vehicle (ROTV) would probably provide the most effective

means of conducting such operations: the ROTV would be able to transport

satellites to and from the higher LEOs as well as MEOs and GEOs that the RLV

would not be able to reach. One such ROTV concept is the Boeing Solar Orbital

Transfer Vehicle concept currently being examined in the Air Force’s Military

Spaceplane Program.

NASA has successfully conducted commercial satellite salvage on a few

occasions. Salvage operations conducted during two separate 1985 NASA Space

Shuttle missions resulted in a partial recovery for insurers of over $280 million in claims

paid out for three satellites that had been stranded in low Earth orbit due to perigee-

kick stage malfunctions.147

146 See, for example: Alpert, Mark, “Making Money in Space,” Scientific American, March 1999.

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A number of studies have also looked beyond satellite salvage to a state of

routine, on-orbit, autonomous satellite maintenance including refueling and updating

modular electronic black boxes. Such endeavors are apparently not financially

viability, and are enabled only by a large drop in launch costs.

Space Based Manufacturing

The literature holds numerous promises of great wealth to be made by

corporations using sizable manufacturing plants in space, especially for

pharmaceuticals and certain materials. The only problem is that so far none of these

promises have come true. A 1983 report for NASA by a panel of the National

Academy of Public administration on encouraging business ventures in space

technologies recommended more emphasis on all facets of NASA’s program on

materials processing in space due to its “large potential for commercialization.” 148

Hertzfeld 149 notes that detailed business studies completed in 1978 predicted full-

scale manufacturing operations in space as quickly as 1984. Seventeen years later

we still don’t manufacture anything in space. More importantly, no key products

appear on the horizon.

The past few years have seen an increasing interest once again in manufacturing

in space. The enthusiasm seems to build as the International Space Station takes

form. Billed in the 1980s and 1990s as an ideal laboratory for commercial materials

processing, proponents for ISS have claimed that research in space will lead to vast

scientific and commercial payoffs. Yet little evidence for this can be seen from

assessing the reams of scientific data obtained from research in space from the mid

1980s to the mid-1990s.150 Beardsley151 observes that as of the 1996 no large

147 Cole, Bob, The Prospects for U.S. Ventures in Space Launch, IC2 Institute, The University of Texas at Austin, 1989, p. 97. 148 National Academy of Public Administration, Encouraging Business Ventures in Space Technologies, Washington, DC, 1983. 149 Hertzfeld, Henry R, “Economic, Market, and Policy Issues of International Launch Vehicle Competition,” in International Space Policy, Papp, Daniel S, and John, McIntyre, R., Editors, Greenwood Press, Inc., Westport, Connecticut, 1987. 150 Beardsley, Tim, “Science in the Sky,” Scientific American, June 1996. 151 Ibid.

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companies are planning major research or manufacturing projects on the ISS, an

interesting fact considering the ISS had been under development since 1984. Alpert

makes a compelling argument against the likelihood of competitive space-based

manufacturing as follows: 152

“For a number of years NASA promoted the idea of space-based

manufacturing, claiming that certain pharmaceuticals, semiconductor

materials and other products could be manufactured with better quality

in an orbital station than in an Earth-based factory. High launch costs

have prevented most companies from considering the ides. But even if

cheaper vehicles become available, very few products could be

manufactured in orbit and sold profitably on Earth. Most products

made in space simply would not be competitive with products made on

the ground – in part because Earth–based manufacturing techniques

are continually improving.”

The situation may be different now, however, due to significant NASA funding

sponsorship of ISS research. Of current interest to some researchers are

applications of crystal growth in space, particularly of proteins, as well as extremely

thin coatings of polymers or semiconductors.

Other Markets: “Spontaneous Space”

Perhaps the most forward, “outside the box” thinking about emerging markets for

space transportation can be found in the writings of Rick Fleeter, CEO of AeroAstro.

Fleeter’s “Spontaneous Space” essay presents a number of interesting potential

offerings including:153

“- Loft a satellite to image an event on earth – an earthquake, volcano,

or maybe a big traffic jam or rock concert in time for the evening news

152 Alpert, Mark, “Making Money in Space,” Scientific American, March 1999. 153 Fleeter, Rick, “Spontaneous Space,” www.mindspring.com/~rfleeter/OLDspontaneousspace.htm.

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- Provide extended solar illumination to your farm in Florida or

California’s central valley, after sunset or before dawn, to speed

harvesting for two days before a forecast frost

- Take a picture of traffic in a New Jersey neighborhood every five

minutes during rush hour to figure out where to locate a new Dunkin

Donuts

- Create a diversion before a critical military operation

- Make detailed photographic records of southern Florida the day

before, and the day after, passage of a hurricane to verify that

insurance claims are for actual storm damage”

Certainly, a myriad of additional emerging market opportunities would appear if

the price for launching payloads into low Earth orbit were to be reduced one or two

orders of magnitude. Some of these applications will no doubt seem blatantly

obvious to our children, or perhaps their children, and even provoke their chuckles

that we were so oblivious.

Summary

In summary, there is an opportunity for explosive growth in the numbers of micro-

nano- and picosatellites launched in the future due to (1) today’s prevalence of

relatively low cost, small ELVs, (2) the emergence of host platforms (or essentially

small orbital transfer vehicles), (3) a multitude of new applications for small satellites

flying in formation or clusters. In addition, this explosive growth may enable the

commercial viability of RLVs, which if successfully developed should further fuel the

growth in small satellites by providing much reduced launch costs. This positive

feedback loop, or virtuous cycle, could be a major driver in growth in small satellites

and RLVs.

A number of other emerging markets could also drive demand for reusable

launch vehicles, perhaps even enabling development. Among these are space

based manufacturing, satellite salvage or maintenance, solar power, space tourism,

fast package delivery, or one or more of Fleeter’s futuristic, but entirely plausible,

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spontaneous space missions. Space tourism is one of the key missions for several

current RLV entrepreneurial ventures. In fact, a common premise in the literature is

that the demand for space tourism will be so high it will drive development of

successive generations of lower and lower cost RLVs, breaking the current

paradigm that space travel is only the venue of governments and their large

aerospace contractors. Upon inspection, however, projected demand for space

tourism seems very uncertain (some would even say dubious) and likely very

sensitive to trip prices, launch costs, and other factors such as consumers’

confidence in the service provider’s competence and the safety of the firm’s RLV

fleet. Perception of the attractiveness of a space tour is possibly very unstable. One

could imagine a venture-enabling portion of the market to vanish overnight – in the

event of one or more disasters early on with one of the commercial ships or even

with another launch vehicle, such as another shuttle disaster like the Challenger. Or

perhaps advances in virtual reality or other entertainment technologies increase

other entertainment options to the degree that interest in space wanes considerably.

Despite its risk, space tourism could be a potent emerging market for reusable

launch vehicles. In his study on design and market synthesis for space tourism,

Kendrick 154 concludes that space tourism will prompt development of a RLV system

that will reduce launch costs to less than fifty dollars per pound to low Earth orbit.

While typically derived from very optimistic data and often greeted by great

skepticism, such predictions may indeed be eventually proven valid: space tourism

could be the key to opening up low cost access to space.

Of course, market elasticity is a key economic factor driving future space launch

demand. In their study on the macroeconomic benefits of low-cost RLVs, Shaw et

al.155 found that the low prices promised by future RLVs, of less than $1000 per

pound to LEO, may elicit a large elastic response from the marketplace, opening the

doors for the entry of a number of new space-based businesses, such as space

154 Kendrick, Rodney, “A Design & Market Synthesis for Space Tourism,” AIAA Paper 2000-5161, AIAA Space 2000 Conference and Exposition, Long Beach, CA, September 19 - 21, 2000.

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manufacturing and satellite servicing which are not profitable at today’s launch

prices. Market elasticity seems to be predicted to be especially large in this study

and others for launch prices of around $500 per pound to LEO.

155 Shaw, Eric J, Hamaker, Joseph W, and Prince, Frank A, “Macroeconomic Benefits Of Low-Cost Reusable Launch Vehicles,” IAF Paper 98-1403, 49th International Astronautical Congress, Melbourne, Australia, September 28 - October 2, 1998.

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4. Space Transportation Supply: Expendable Launch

Vehicles

This chapter presents an overview of current expendable launch vehicle

development programs as well as recent entrants to the ELV market over the past

few years. The chapter also examines a number of small, private, entrepreneurial

ELV ventures that failed, as well as an overview of the supply of expendable launch

vehicles.

Supply Overview

Especially at the beginning of the space age, the primary motives for countries to

engage in space exploration have been national security and national prestige.

Other factors, such as keeping a skilled labor force employed and maintaining an

advanced scientific and engineering research and development capability, were also

considered and perhaps have become more important with time. From exclusively

public beginnings, space launch has only gradually and partially become

commercialized and privatized; many launchers remain today under the control of

their governments which offer commercial launch services at heavily subsidized

rates. Thus, the supply-side of space launch transportation has to date been

dominated by the public sector, and due to the existence of numerous daunting

barriers to entry there is no reason to believe this will change in the near future.

Public sector research and development investments in current space launch

systems are sunk costs, and they will be incurred over and over again by nation after

nation as new governments strive to acquire their own space launch capability. As

nations competed for military might and prestige based on naval fleet size hundreds

of years ago, so do some countries today strive to belong to the “elite” club of space-

faring nations. North Korea, for example, alarmed much of the world in August 1998

with their launch of the Taepo Dong 1 ballistic missile, claiming to have orbited the

country's first satellite. (Interestingly, a number of Western analysts and satellite

experts debated the validity of this claim, noting the launch but neither able to find

evidence of a satellite in the orbital parameters given by the North Koreans, nor able

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to hear any of the satellite’s audio transmissions - revolutionary hymns and Morse

code signals).156

Since the public sector developed the systems, it is important to realize that

making a profit is not the most important consideration for many suppliers of space

launch vehicles. Indeed, making a profit may be impossible for most launch

systems, especially if development and infrastructure costs need be amortized (see

this chapter’s Ariane 5 discussion). Direct and indirect government subsidies are

therefore a way of life in this business, not a temporary manifestation. In the future

additional governments will almost certainly develop their own space launch capacity

and will probably offer commercial services regardless if a profit can be had. Market

economics will therefore drive the number of launcher types and quantities but not

below a certain minimum capacity. Only very recently have ELV services offered by

private enterprises provided substantial competition to government owned launch

vehicle systems. Even so, every operational space launch system to date was

developed at least in part in part through government subsidies. The current wave

of private ELV and RLV entrepreneurial development efforts are attempting to

challenge this paradigm.

Key Players & Rivalry

Global Competition & Overcapacity

Major players in the space launch industry are The Boeing Company, Lockheed

Martin Corporation, Orbital Sciences Corporation, Arianespace (a France-based

consortium of 50 companies), Russia’s Krunichev, Russia’s Starsem, Ukraine’s

Yuzhnoe, and China’s Great Wall Industries Incorporated. Several minor players

also exist who have the potential to substantially increase their market share, such

as Japan and India.

156 "North Korean Space Guide," World Space Guide, FAS Space Policy Project, www.fas.org/spp/guide/dprk/index.html.

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The number of launch systems offered today is higher than at any other time in

history. Recent growth in the number of new launch vehicles is also historically

large. In last decade or so many new vehicles have arrived on the international

market including, Arianespace’s Ariane 5, Lockheed Martin’s Athena, LMLV-1, Titan

IV-B, and Atlas III, Eurockot’s Rockot, Boeing’s Delta III, Japan’s H-2 and M-5,

China’s Long March CZ-3B, Orbital Science’s Pegasus XL, Russia’s Proton M, and

Sea Launch’s Zenit 3SL.157 Market entry of Russian, Ukrainian, and Chinese ELVs

was accompanied by United States government restrictions on the number and

prices of their launches. Presumably, this was to limit predatory pricing that could

limit U.S. firms from investing in development of new launch vehicles or upgrades to

existing ones.158

The space transportation industry is currently suffering from heightened global

competition and overcapacity. The high level of international competition is obvious

by a quick scan of a compilation of the vehicles launched last year with their

respective providers, as seen in Table 2, from the Space Transportation

Association’s Complete Launch Log for 2000.159

Table 2 Space Launch Vehicles Launched During Year 2000

Vehicle Provider

Launch Vehicles (and variants) Launched in 2000

Lockheed Martin Atlas 2, 2A, 2AS, 3 Starsem Soyuz-Fregat Arianespace Ariane 4, 42L, 44LP, 505, 506, 508 China Great Wall Industry Co.

Long March 3A, 3, 4B

Orbital Sciences Minotaur, Taurus, Pegasus XL Russia Soyuz-U, Proton, Proton K, Eurockot Rockot,

Cosmos 3M, Soyuz-U, Start-1, Tsiklon 3 Ukraine Zenit-2 Boeing Delta 2, 3 Japan M-5

157 Cáceres, Marco, “Why Space Mishaps Are On The Rise,” Aerospace America, July 2000, p. 18. 158 World Technology Division, Global Satellite Communications Technology and Systems, International Technology Research Institute, December 1998. 159 The Space Transportation Association, “Complete Launch Log for 2000,” www.spacetransportation.org.

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NASA Space Shuttles (Endeavour, Atlantis, Discovery) International Launch Services

Proton, K, DM

Sea Launch Zenit 3SL USAF Titan 2, 4B, Delta 2, Atlas 2AS Russian Ministry of Defense

Proton

China CZ-4B ISC Kosmotras Dnepr

United States satellites and launch services are purchased by many foreign

countries, making this U.S. industry a large contributor to the U.S. trade balance. In

the free world, the United States had nearly a monopoly in launch services for

decades and still controlled the world’s commercial launch business as late as the

mid-1980s. Today, however, the U.S. portion of the world’s commercial market has

been eroded to somewhere between 30 - 50%, roughly equal to that held by

Arianespace’s Ariane rocket system alone. Although the literature is not entirely

consistent on market shares, a recent industry analysis attributes market share as

follows: Arianespace - 30%, Boeing - 20%, Krunichev - 18%, and Lockheed Martin –

15%.160 (Others give Arianespace’s share in 2000 at 50%).161 Thus, approximately

83% of the world’s market share is controlled by only 4 organizations. This

competition is only heating up. Ukraine, Russia, China, Japan, Israel, Brazil, and

India already have, or are in the process of developing, expendable launch vehicles

of which many are offered commercially. In addition, at least 15 entrepreneurial

firms are also diligently working to develop their concepts, hoping to enter the fray in

the next few years. Almost all of these concepts are reusable launch vehicles, which

the entrepreneurs generally claim will reduce launch costs by 25% to 90% compared

to current systems. Overall, competition has increased dramatically in the

commercial launch market, reducing industry profits substantially.

With some of the highest launch fees in the world, the U.S. space launch industry

has retained significant market share in the face of lower price foreign competition.

160 Friedman, Robert E., “Standard & Poor’s Industry Surveys: Aerospace & Defense,” August 10, 2000. 161 Pirard, Théo, “Conversations with Françoise Bouzitat,” Aerospace America, November 2000.

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Some attribute this to the United States having historically higher launch vehicle

reliabilities, an important competitive advantage in an industry that experiences a

very high launch failure rate.162 A rash of U.S. launch vehicle catastrophes over the

past few years coupled with lower launch prices and vast improvements in many

foreign systems has seriously eroded this advantage, although very recent U.S. and

foreign partnerships might be reversing this trend.

The challenge to the space transportation industry on the current global over-

capacity of space launch services was noted by Francois Auque, the executive vice

president of EADS (European Aeronautic Defense and Space company) in a recent

interview with Aerospace America.163 Auque noted the need to “streamline the

global European system to make it more efficient” and that “the general trend is

clearly to reduce costs…” Interestingly, Auque added that EADS is “convinced there

is room for transatlantic cooperation” in the launch services arena. This was a

curious comment in so much that Europe and the United States currently have a

very high level of rivalry in space launch, and highly competitive and not easily

absorbable launch vehicle families. In contrast, a recent interview with Françoise

Bouzitat, secretary general of Arianespace, mentions the possibility of further

European cooperation in the ELV arena to increase global competitiveness. Last

year, for example, the Arianespace board agreed to pursue the strategy of arranging

joint ventures with Starsem and Eurokot in order to acquire the ability to market a full

range of launch services, all under a European label.164 Arianespace currently offers

only heavy lift launch services with its Ariane 4 and Ariane 5 ELVs. France-based

Starsem, established in 1996, is a European-Russian company that provides reliable

and proven Russian Soyuz rocket launch services to the commercial market, while

Eurokot Launch Services GmbH is a joint venture of Germany’s Astrium GmbH and

Russia’s Khrunichev State Research and Production Space Center to launch

162 Friedman, Robert E., “Standard & Poor’s Industry Surveys: Aerospace & Defense,” August 10, 2000. 163 David, Leonard, “Conversations with Francois Auque,” Aerospace America, January 2001. 164 Pirard, Théo, “Conversations with Françoise Bouzitat,” Aerospace America, November 2000.

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commercial ELV derivatives of the highly reliable Russian SS-19 ICBM.165 In

response to the interviewer’s question of who is Arianespace’s most serious, current

rival, Bouzitat responded, 166

“Arianespace’s most challenging (current) competitors are the U.S.

companies that are marketing competitive rockets produced in Russia

and Ukraine.”

As another sign of the current competitive climate, both ILS and Boeing

reportedly have announced their goal of each acquiring 50% of the worldwide

market for launch services, a direct challenge to Arianespace.167

The revenue model for launch services has also changed, reflecting the

increased competition in the industry as well as the trend away from single satellite

customers and towards satellite constellations. Instead of the traditional ordering of

a single launch at a time, the trend over the past few years has been for satellite

manufacturers and service providers to purchase blocks of options, a much more

lucrative option for many launch companies.

New Entrants into the ELV Market

A number of new expendable launch vehicles have entered the market over the

past few years, helping to create the greatest overcapacity of launch services ever.

This section takes a brief look at some of these new ELV entrants.

United States Air Force, Boeing, & Lockheed Martin - EELV

The Evolved Expendable Launch Vehicle (EELV) program is a partnership

between the United States Air Force (USAF) and industry to develop two new

national launch systems, the Atlas V with Lockheed Martin Corporation and the

Delta IV with The Boeing Company, to replace existing Atlas, Titan, and Delta ELV

165 www.starsem.com & www.eurockot.com. 166 Pirard, Théo, “Conversations with Françoise Bouzitat,” Aerospace America, November 2000. 167 Pirard, Théo, “Conversations with Françoise Bouzitat,” Aerospace America, November 2000.

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fleets. Consistent with its name, EELV development is evolutionary, focusing on

standardizing or consolidating launch vehicle manufacturing processes, procedures,

support equipment, and infrastructure, leveraging many existing, well-proven

technologies and system components. The overall goals of the program are to

provide medium and heavy lift expendable launch vehicle families that will reduce

launch costs by at least 25% from current levels, as well as to strengthen the U.S.

space launch industry.

The reduction in launch costs should be realized by the EELV program largely by

means of two significant design innovations: standardization of launch vehicle–

payload integration interfaces and standardization of the booster cores. The former

includes standardized specifications for environmental, mechanical, and electrical

launch vehicle-payload interfaces, greatly reducing the effort of integrating payloads

into the launch vehicles, as well as allowing for rapid switching of payloads between

the EELV boosters. These design innovations should significantly reduce

manufacturing, assembly, payload integration, and launch operations costs, and

helped the program office win the 1999 Defense Standardization Program National

Honorary Award. Largely due to these innovations, the EELV program is expected

to save DoD an estimated $5 to 7 billion in launch costs over the next two

decades.168

The USAF began the first phase of the EELV program in 1995, funding

competitive preliminary design and risk reduction demonstrations by Alliant

Techsystems, The Boeing Company, Lockheed Martin Corporation, and McDonnell

Douglas Aerospace. These four $30 million contracts were completed by late 1996,

and the program down-selected into the second program phase, retaining Boeing

and Lockheed Martin to conduct $60 million, 17 month efforts to refine their launch

system concepts and complete a detailed system design.169 The program initially

intended to select one of the two competing contractors and fund the development of

168 Summerall, Tonya, 1st Lt., "EELV Program Saves Money," SPACEDAILY, July 3, 2000. 169 www.laafb.af.mil/SMC/MV/eelvhome.htm.

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their new launch system. Due to the very positive market outlook in 1997, however,

and in order to take better advantage of competition, the EELV program was

restructured mid-stream, resulting in USAF cost sharing on both new launcher

developments rather than acquiring only one, to the tune of about $500 million each

to Lockheed Martin and Boeing for engineering and manufacturing development.170

The EELV program was again modified in 2000 due to the rapidly changing

launch market. Reacting to last year’s waning commercial launch market, the EELV

program released Lockheed Martin from its commitment to build an Atlas V launch

pad on the U.S. Western Range at Vandenberg Air Force Base, California. Under

the new plans, Boeing will launch its medium and heavy lift Delta IVs from both the

Eastern Range (Cape Canaveral Air Force Station, Florida) and Western Ranges,

but Lockheed will only launch medium lift Atlas Vs from the Eastern range. In

addition, Lockheed agreed to complete qualification of its heavy lift Atlas V, but does

not intend to fly unless called upon by the Department of Defense (DoD) to back up

Boeing’s heavy lift EELV.171 When online, the EELVs will constitute DoD’s sole

source of medium to heavy lift expendable launch vehicles.

The first (demonstration) launches of the medium lift and heavy lift EELVs are

scheduled for 2002 and 2003, respectively.172 In order to help reduce risk the USAF

will fund the first heavy lift Delta IV launch, paying Boeing $141 million to launch a

simulated payload.173 Reportedly, a Broad Area Review into past launch accidents

recommended the Air Force consider using commercial launch insurance for some

future EELV flights.174 The Air Force has never utilized commercial launch

insurance in the past, but could adopt the practice depending on the success of the

first few EELV launches. A possible complication is the typical requirement by the

170 McKinney, Col. Richard W, et al. “EELV Meets CAIV,” Aerospace America, May 1999, p. 68. 171 Mason, James, “Launching Into,” Flight International, December 19, 2000, p. 32. 172 www.laafb.af.mil/SMC/MV/eelvhome.htm. 173 Mason, James, “Launching Into,” Flight International, December 19, 2000, p. 32. 174 Wall, Robert, “EELV Outlook Impacted by Weakness In Commercial Launch Market, Aviation Week & Space Technology, July 3, 2000.

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insurer for both launch vehicle and payload information data; the security

classification of some of the EELV missions would not allow this information to be

given to insurers, particularly since they are generally foreign firms.

India – PSLV, GSLV

India entered the commercial launch service marketplace in May 1999, launching

small research satellites for South Korea and Germany with the Indian Space

Research Organization’s (ISRO) Polar Satellite Launch Vehicle (PSLV).175 The

PSLV is a four stage ELV that uses a combination of solid and liquid-propellant

stages as well as several strap-on boosters. ISRO also plans to soon enter the

geosynchronous orbit commercial launch market with their Geostationary Satellite

Launch Vehicle (GSLV), scheduled for a first launch in 2001. ISRO stated recently

that they would eventually offer commercial launch services at a cost about 25%

lower than available anywhere else.176

Arianespace – Ariane 5

Arianespace is arguably the most dominant player in the space launch industry

and their new Ariane 5 heavy lift launcher should continue this trend. Currently in a

transitional phase between the Ariane 4 and the fully operational Ariane 5,

Arianespace was very successful in wresting market share from U.S. launch service

providers in the 1980s and 1990s and is currently a very tough competitor. In 1997,

for example, Arianespace owned over 50% of the world’s commercial market versus

the U.S.’s 30% share. The first commercial launch of the Ariane 5 occurred in

December 1999. The Ariane 5 ELV is capable of launching up to about 40,000 lb

into LEO, and 15,000 lb into GTO.

The Ariane ELV family was the first ever designed purely for commercial

operations. As a result, Arianespace’s efficiency of launch operations is impressive.

175 “India Marks First Commercial Launch,” SpaceViews, May 26, 1999, www.spaceviews.com/1999/05/26a.html. 176 “Indian Space Research Organization (ISRO),” Aerospace Daily, Vol. 197, No. 24, p. 208, February 7, 2001.

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While each Ariane is integrated and launched in roughly three weeks, for example,

American competitors habitually take four to six weeks, and in many cases use

about twice as many personnel in doing so. Arianespace also typically launches a

dozen or more times per year, a pace unmatched by any other competitor in the

world and a fundamental reason why Arianespace is so successful. More frequent

launch opportunities provides more schedule freedom for customers who may

otherwise have to pay many months of interest on huge capital investments before

being served. More frequent launches also translates into higher manufacturing and

operational economies of scale.

As a heavy lift launch vehicle of GTO services, Arianespace has the competitive

advantage of a launch facility located in Kourou, French Guiana, near the equator.

(Equatorial launches to GTO are far more efficient than those from higher latitudes

due to their maximum utilization of the Earth’s rotational speed). This allows an

Ariane ELV to carry heavier payloads, a boon to the communication’s industry that

has consistently demanded bigger and more capable GEO satellites over the last

few decades. Unlike the U.S.’s two primary launch sites, the Eastern Range out of

Cape Canaveral Air Station in Florida, and Vandenberg Air Force Base in California,

Kourou is a commercially constructed and commercially operated spaceport. By not

sharing the spaceport with other companies, Arianespace must pay a higher fee per

launch to pay for the facilities. However, unlike the primary American spaceports

that are owned by the United States government, Ariane does not suffer high costs

associated with launch pad logjam. Demand to use the launch facilities at Cape

Kennedy is so high at times if a launch is cancelled due to technical problems or bad

weather, its two-day launch slot might expire, forcing the launch vehicle to be

removed from the launch pad and delaying the launch for days or even weeks

before another slot can be scheduled.177

177 Suriano, Robyn, “Florida’s Future in Space: Arianespace is Big Threat to The State,” Florida Today, 1997, www.flatoday.com/space/explore/special/floridasfuture/

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ESA’s cost to develop the Ariane 5 ELV for Arianespace, including required

spaceport infrastructure, has been estimated at $9 billion. Fortunately for

Arianespace, ESA’s investment is free and thus is essentially a large subsidy. As

pointed out by the WTEC (World Technology Division, International Technology

Research Institute) panel in their Global Satellite Communications Technology and

Systems, December 1998 report,178 such a large investment would likely exclude

purely commercial companies from competing in the heavy lift segment of the space

launch industry; amortization of these funds even with a very low cost of capital of

10% or 15% would add roughly $90 to $110 million per launch, causing the system

to be unaffordable to customers. Furthermore, it took about twelve years for ESA to

develop, test, and make the Ariane commercially operational. Such a long

development time without revenue streams may be prohibitively costly for private

ventures.

The upgrade from Ariane 4 to Ariane 5 was almost entirely a performance

improvement, an increase in payload mass capability, rather than a cost reduction.

This focus on increasing performance instead of reducing costs appears to be the

normal growth strategy for ELVs. WTEC observes further that if it is necessary to

depend on government subsides to fund performance enhancements via

development of derivative heavy lift ELVs, it is almost even more certainly required

to fund a more heavily modified ELV variant that incorporates significant operational

cost reductions.179

In a recent interview Françoise Bouzitat, secretary general of Arianespace, was

asked why Arianespace was pressing ESA member states for additional investments

to upgrade Ariane 5’s performance in the near future, especially with Ariane 5’s

already impressive performance. Her response was that Arianespace sees stable

future GEO market of about 25 to 30 satellites annually. However, due to current

growth trends in GEO satellite weight, Arianespace expects to eventually need the

178 World Technology Division, Global Satellite Communications Technology and Systems, International Technology Research Institute, December 1998.

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capability to place 7 (metric) ton satellites into GTO. Thus, in order to continue their

cost effective practice of launching two or more satellites at a time, the company is

already working on Ariane 5 upgrades to 10 tons to GTO by 2002 and 12 tons by

2005 - 2006 timeframe.180

Brazil - VLS

Brazil established a space program in the early 1960s and over the last four

decades has developed four sounding (suborbital) rockets and one small, orbital

ELV, the Satellite Launching Vehicle (VLS). The VLS is designed to orbit payloads

of up to approximately 840 pounds. Both test flights of the VLS have failed, the first

in November 1997, and the second in December 1999. A 1997 report said that the

VLS’s price tag was only $6.5 million, which would be very competitive if system

problems can be corrected.181 Like the Ariane, the VLS also takes advantage of a

well-situated launch site near the equator.

Japan - H-2A

Japan’s NASDA (National Space Development Agency) is trying to build a viable

commercial launch business with their development of the H-2A system, a derivative

of their problematic and very costly H-2 ELV. Before the H2 program was cancelled

following a catastrophic launch failure in late 1999, each flight cost about $170

million. In order to successfully compete in today’s market, it is estimated that the

H2A will have to be able to offer launches for $100 million or less.182 Despite

NASDA’s efforts to reduce costs, however, H2A launches are expected to be

expensive due to the relatively high value of the yen compared to the dollar, low

production volumes, and mixed success of several cost reduction programs. One

cost cutting option being considered by NASDA is to purchase components from

U.S. companies rather than produce them domestically. This option might not be

179 Ibid. 180 Pirard, Théo, “Conversations with Françoise Bouzitat,” Aerospace America, November 2000. 181 “Brazil’s First Space Rocket Falls Into Sea,” CNN, November 3, 1997, www.cnn.com/TECH/9711/03/brazil.rocket/. 182 Kelly, Emma, “Engine Problem Forces H2A Launcher to Delay First Flight,” Flight International, December 5, 2000, p. 35.

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exercised, as it is against Japan’s prior strategy of trying to independently develop a

self-sufficient, indigenous launch business.183

Hughes (now Boeing Satellite Systems) and Loral have each placed orders for

10 H-2A rockets to launch large communications satellites, in order to diversify their

suppliers of launch services.184 Since then, technical problems with the Mitsubishi

LE-7A first stage engine have delayed the first flight of the H2A from February 2001

until at least summer.185

Sea Launch, Inc. - Zenit-3SL

Sea Launch, the only ocean-based launch service company, provides

commercial heavy lift launch services with the Zenit-3SL ELV from an equatorial

launch platform in the Pacific Ocean. Sea Launch is an international partnership

composed of Boeing Commercial Space Company, Russia’s RSC Energia,

Ukraine’s SDO Yuzhnoye/PO Yuzhmash, and Norway’s Anglo-Norwegian Kvaerner

Group.186 Boeing, with 40% ownership, is responsible for overall integration and

operations management. RSC Energia has a 25% share and provides an upper

stage as well as launch vehicle integration and mission operations. SDO

Yuzhnoye/PO Yuzhmash holds a 15% share and provides the first two rocket

stages, launch vehicle processing and operations. Kvaerner Group, with a 20%

share, provides operational services for the launch platform it converted from an oil-

drilling rig and for the assembly and command ship. Although Sea Launch’s

equatorial launch site provides a competitive advantage for the company, it may be

offset somewhat by the significant logistics and transportation challenges.

Sea Launch’s inaugural flight took place in March 1999, and its first commercial

flight occurred in October of that year. Although both flights were successful, Sea

183 Ibid. 184 Davis, Neil, “Japan Strives to Fix Space Program,” Aerospace America, June 2000. 185 Kelly, Emma, “Engine Problem Forces H2A Launcher to Delay First Flight,” Flight International, December 5, 2000, p. 35. 186 www.sea-launch.com.

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Launch’s third flight in March 2000 ended in failure. Subsequent commercial

launches in July and October 2000 and March 2001 were successful.

USAF - Orbital Suborbital Program Space Launch Vehicle (Minotaur)

The Orbital Suborbital Program Space Launch Vehicle (also known as the

"Minotaur") was developed for the USAF to provide a low cost, reliable space launch

capability to support United States government small-satellite launches.187 The four-

stage Minotaur is made of a combination of the Minuteman II ICBM and the Orbital

Science Corporation’s Pegasus XL launch vehicle, with the M-55A1 and SR-19

Minuteman II rocket motors forming the first two stages, and the Orion 50 XL and

Orion 38 Pegasus XL rocket motors forming the third and fourth stages, respectively.

A Pegasus payload fairing is also utilized.188

The Minotaur is integrated by Orbital Science Corporation, and can launch as

much as 750 lb into LEO. The development of the Minotaur was designed to

incorporate most of the development risk in the first mission, to be followed by lower

cost, routine launch operations. The cost of the first Minotaur launch was $23

million; follow-on launches are estimated to cost about $13 million.189 To date, there

have been two successful launches, the first in January 1999, and the second in July

2000. The first Minotaur launch was reportedly the first ever U.S. rocket launch from

a privately-owned commercial spaceport in the United States (operated by

Spaceport Systems International, a limited partnership of ITT Industries, Inc. and

California Commercial Spaceport.) 190

Eurockot Launch Services GmbH - Rockot

Eurockot Launch Services GmbH is a joint venture of Germany’s Astrium GmbH

and Russia’s Khrunichev State Research and Production Space Center, with 51%

187 USAF Fact Sheet, The OSP Space Launch Vehicle ("Minotaur"), www.losangeles.af.mil/SMC/PA/Fact_Sheets/minotaur_fs.htm. 188 Ibid. 189 Serra, Jeans-Jacques, “Minotour,” The Satellite Encyclopedia, www.tbs-satellite.com/tse/online/lanc_conestoga.html. 190 Ibid.

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and 49% shares, respectively. The Rockot is an adaptation of the highly reliable

Russian SS-19 ICBM, which has been flight-tested over 140 times, according to the

company’s web site, and can launch about 4200 pounds to LEO.191 A “Commercial

Demonstration Flight” in May 2000 was a success, and the first commercial flight is

scheduled for fall of 2001.

Starsem - Soyuz

France-based Starsem, established in 1996, is a European-Russian company

that provides reliable and proven Russian Soyuz rocket launch services to the

commercial market. Starsem is responsible for commercial marketing, sales, and

operations of the Soyuz ELV family, and its first six commercial launches were all

conducted in 1999. In June of 2000 Starsem shareholders were Aerospatiale Matra

(35%), Arianespace (15%), the Russian Aeronautics and Space Agency (25%), and

the Samara Space Center (25%). That month Starsem and Eurockot Launch

Services announced they had formed a strategic partnership coordinating their

marketing and development activities. This alliance followed the establishment of

the European Aeronautics, Defense, and Space Company (EADS), formed by the

merger of several European companies including Aerospatiale Matra, a 35%

stockholder in Starsem, and Daimler Aerospace (now Astrium GmbH), a 51%

stockholder in Eurockot.192 The partnership was also related to a decision by

Arianespace to support a combined Rockot, Soyuz, and Ariane 5 launch vehicle

family that could cover almost any customer’s needs in the light, medium, and heavy

lift categories, respectively.

To date, Starsem has invested some $100 million to upgrade launch and payload

facilities at Baikonur in Kazakhstan to accommodate customers, and to aid

development of the new Soyuz ST version. Starsem’s CEO and chairman, Jean-

Yves Le Gall, stated in a recent interview that the company hoped to be profitable

191 www.eurockot.com. 192 www.starsem.com/news/release.htm.

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within four years.193 The demonstrated reliability of the Soyuz rocket (last failure

occurred in 1996), its high flight rate (more than one per month), and its relatively

short preparation time (about two months) are all sources of competitive advantage

for Starsem. Le Gall notes that the unmanned Soyuz rockets are manufactured with

the same level of quality as that of the manned version, resulting in a marketing

advantage.194

Microcosm – Scorpius

Microcosm is a small business specializing in reducing space mission costs

through several products ranging from control systems to space qualified

torquers.195 Established in 1984, Microcosm is currently developing the Scorpius

family of very low cost, responsive ELVs with a wide range of payload / performance

capability, from suborbital rockets with 200 lb payloads to heavy lift ELVs capable of

placing 160,000 lb to LEO.196 Program focus is on low-cost technology and

simplified vehicle design with the goal to transform space launch from its current

high-risk, high cost, and long lead time paradigm to a low cost, responsive, normal

occurrence. Microcosm has conducted at least two successful suborbital flight tests

to date, including the Scorpius SR-S in January 1999, and Scorpius SR-XM in March

2001. An earlier September 1998 test of the SR-S was seriously damaged in an

aborted launch accident in which the rocket caught fire.197

The Air Force Research Laboratory funded the early development of the

Scorpius suborbital ELVs under Small Business Innovation Research contracts.

NASA, the Ballistic Missile Defense Office, the Air Force, and Congressional plus-

193 Pirard, Théo, “Conversations with Jean-Yves Le Gall,” Aerospace America, April 2001. 194 Ibid. 195 www.smad.com/about/profile.html. 196 Berry, James V., Conger, Robert E., and Wertz, James R., “The Sprite Mini-Lift Vehicle: Performance, Cost, and Schedule Projections for the First of the Scorpius Low-Cost Launch Vehicles,” SSC99-X-7, 13th Annual AIAA/USU Conference on Small Satellites, www.smad.com. 197 Berry, James V., Conger, Robert E., and Wertz, James R., “The Sprite Mini-Lift Vehicle: Performance, Cost, and Schedule Projections for the First of the Scorpius Low-Cost Launch Vehicles,” SSC99-X-7, 13th Annual AIAA/USU Conference on Small Satellites, www.smad.com.

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ups have provided additional funding. The effort has included development of low

cost, pressure-fed liquid oxygen / kerosene rocket engines.

International Launch Services (ILS) – Atlas & Proton

International Launch Services, established in 1995, is a joint venture between

Lockheed Martin and Lockheed Khrunichev Energia International to provide launch

services with Lockheed Martin’s Atlas and Russian Proton ELVs. Business appears

to be brisk; in 2000 alone ILS executed six successful Proton launches and eight

successful Atlas launches.198

First launch of the new Atlas III took place in May 2000, a notable launch for

another reason too: it was the first U.S. built rocket to be powered by the RD-180,

originally a Russian-built engine, and produced for ILS by a joint venture of Pratt &

Whitney and Russia’s NPO Energomash.199 Priced at only about $10 million, the

RD-180 delivers about three times the thrust of a Space Shuttle Main Engine for less

than a third of the cost. The Atlas 3 was the culmination of a five-year, $400 million

development effort. The Atlas began commercial payload launch operations in June

1987.200

The Proton, which has been the primary heavy lift workhorse for Russian

unmanned space missions since the early 1960s, conducted its first Western

commercial launch in April 1996.

Failed Entrepreneurial Expendable Space Launch Vehicle Efforts

The past is littered with expendable space launch vehicle entrepreneurial

companies that failed due to either technical difficulties or insufficient raised capital,

or both. To date, every single entrepreneurial orbital venture without government

198 “ILS Awarded Two Launches of Astra Satellites in 2001,” Spaceflight Now, www.spaceflightnow.com. 199 Williams, Craig H., “The Year in Review: Space Transportation,” Aerospace America, December 2000, p. 93. 200 World Technology Division, Global Satellite Communications Technology and Systems, International Technology Research Institute, December 1998.

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involvement has failed. Among them were Beal Aerospace, American Rocket

Company, Starstruck, Inc., Transpace Carriers Inc., E’Prime Aerospace Corporation,

Space Services, Inc., Conatec, Inc., OTRAG, and Space Services, Inc. The first

three are notable in that they all ambitiously tried to develop new technologies rather

than simply adopting or modifying off-the-shelf technologies. The efforts of these

companies are briefly described below.

Beal Aerospace – BA-2, 1997 - 2000

Beal Aerospace was established in 1997 by banker Andrew Beal as a response

to the booming satellite launch market. Instead of seeking angel and venture capital

as the RLV entrepreneurial firms did around that time, Beal funded the company

himself, using the profits from his 99% ownership of Beal Bank.201

The BA-2 concept was a heavy lift, expendable launch vehicle design capable of

placing 13,200 pounds into geosynchronous orbit. If it had been successful, the BA-

2 would have competed with Arianespace’s Ariane 5 and heavy lift EELV variants.

Beal Aerospace made significant progress in its development of the BA-2, especially

the huge BA-810 rocket engine which would have been the largest hydrogen

peroxide / kerosene engine ever built.

In September 2000, Beal Aerospace laid off 80 employees, over half of its work

force. About a month later the company closed down, blaming “‘intolerable’

competition from government supported initiatives,” namely NASA’s Space Launch

initiative program and the Air Force’s Evolved Expendable Launch Vehicle

program.202

201 Foust, Jeff, “Beal Aerospace Shuts Down; Cites ‘Intolerable’ Gov’t Interference As Factor,” 23 October 2000, www.space.com. 202 Ibid. Both the EELV and SLI (under a different name) programs were underway in 1997, the same year Beal Aerospace was established. It is curious that Andrew Beal was not deterred from starting Beal Aerospace at that time, even though the launch vehicle market was a bull. It may be a coincidence that Beal Aerospace closed its doors around the time the projected launch vehicle market became a bear.

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Starstruck, Inc. – Dolphin, 1981 - 1984

In August 1984 Starstruck, Inc. conducted one partially successful test launch of

its prototype Dolphin liquid ELV, from a submerged platform in the ocean. This was

only the second privately funded rocket launch by a U.S. company. The Dolphin

was meant to be a predecessor to Starstruck’s four-stage commercial launch

vehicle, the Constellation. Discouraged by higher than expected development costs,

the Redwood City, California company ceased operations not long after the

launch.203

American Rocket Company (AMROC) – Aquila, SMLV, 1985 - 1994

Born from the ashes of Starstruck in 1985, AMROC successfully designed, built,

and extensively tested hybrid liquid-solid rocket engines. Eventually, the company

incorporated these engines into their SMLV expendable launch vehicle. Their only

test launch took place in October 1989 and suffered an in-flight failure.

SpaceDev, a commercial space exploration company, acquired exclusive

worldwide license rights to Amroc intellectual property in August 1998 for a minimum

of five years.204 If successful in commercializing this technology, SpaceDev will

have the rights to purchase the technology with discounted stock. The intellectual

property included three patents on hybrid rocket engine technology. Recently

SpaceDev test fired a small hybrid rocket engine to be incorporated into a prototype

orbital transfer vehicle.205

Space Services, Inc. – Conestoga, 1980 - 1990

One of the earliest private ELV ventures, Space Services Inc. (SSI) carried out

the first successful privately funded rocket launch by a U.S. company in September

1982.206 However, SSI’s original launch vehicle, the Percheron, was not so

203 Cole, Bob, The Prospects for U.S. Ventures in Space Launch, IC2 Institute, The University of Texas at Austin, 1989, p.137. 204 “SpaceDev Acquires Hybrid Rocket Technology,” SPACEDAILY, August 14, 1998, www.spacedaily.com/news. 205 “SpaceDev Successfully Fires First Rocket Motor,” Business Wire, November 16, 2000. 206 Ibid.

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successful. The Percheron was a liquid propellant rocket designed by SSI that

violently exploded during its first engine static test in August 1981.207 In response,

SSI adapted quickly, switching to an ELV design using existing, operational solid

propellant rocket motors. Established in September 1980, Space Services Inc.’s

goal became to develop the Conestoga family of low-cost, reliable ELVs using off-

the-shelf technology. The Conestoga was a modular, multiple-stage ELV built with a

core rocket motor and with additional motors strapped around it. The rocket motors

were Morton Thiokol Castor-4 solid rocket boosters, which had a well-demonstrated

high reliability as a strap-on for the Delta expendable launch vehicle. SSI contracted

the experienced Space Data Corporation to build the Conestoga for them. SSI

planned for the Conestoga launch vehicle family to be comprised of four rockets

ranging in performance from 300 lb to 3000 lb payload to LEO, utilizing various

Thiokol boosters including the Castor-4, Star-37, and Star-48 motors.208

After SSI’s successful 1982 launch of a sub-scale rocket, the company began

looking for customers for its Conestoga family of launch vehicles. Although

numerous organizations from around the world showed some interest, potential

customers elected not to sign on, in many cases citing the company’s lack of

experience and existing launch vehicle inventory.209 After several years passed

without a booking, Space Services Inc. attempted to market their launch services for

a particularly unique application – launching human cremated ashes into space.210

After receiving thousands of orders over multiple years, SSI still did not have enough

to make a dedicated launch economically viable and the space “burial” project was

abandoned.211

207 Serra, Jeans-Jacques, “Conestoga,” The Satellite Encyclopedia, www.tbs-satellite.com/tse/online/lanc_conestoga.html. 208 From: Ibid. and Cole, Bob, The Prospects for U.S. Ventures in Space Launch, IC2 Institute, The University of Texas at Austin, 1989. 209 Apparently “Just In Time” supply-chain techniques weren’t appreciated as much as today… 210 Brooks, Timothy A, “Regulating International Trade in Launch Services,” Berkley Technology Law Journal, Volume 6:1, Spring 1991, www.law.berkeley.edu/journals/btlj/articles/vol6.html. 211 Cole, Bob, The Prospects for U.S. Ventures in Space Launch, IC2 Institute, The University of Texas at Austin, 1989.

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EER Systems - Conestoga

In December 1990, EER Systems Corporation acquired the Conestoga design

with their purchase of Space Services Inc., which became EER’s Space Services

Division.212 Like SSI, EER spent significant effort trying to find customers to service.

EER succeeded in obtaining a five-launch contract with the Strategic Defense

Initiative Office (later, the Ballistic Missile Defense Organization) for launch of Star

Wars program elements. However, the contract was cancelled when the Star Wars

program was cancelled.213 EER eventually finally obtained NASA as a customer by

their involvement with NASA’s COMET (Commercial Experiment Transporter)

program that began in 1990. EER’s only launch of the Conestoga took place in

October 1995. The rocket broke into pieces less than a minute after launch, putting

EER out of the launch services business.214

OTRAG (Orbital Transport and Rocket Corporation215) – OTRAG-1, 1974 -

1987

OTRAG was a very controversial German company founded around 1974 to

create a very low cost, modular ELV. According to sources, Dr. Lutz Kayser, a

student of the famous German rocket pioneer Eugene Sänger, received West

German government funding from 1971 to 1974 to study a very low cost ELV.216

After the government halted funding, Kayser started OTRAG, with a registered home

office in Stuttgart, Germany, and acquired the aid of Kurt Debus, former director of

the German Peenemünde Center during World War II, and later former director of

the Kennedy Space Center.217

Kayser planned to create a family of rockets capable of placing payloads ranging

from 200 to 10,000 kg (440 to 22,000 lb) to low Earth orbit. Each rocket employed a

212 Serra, Jeans-Jacques, “Conestoga,” The Satellite Encyclopedia, www.tbs-satellite.com/tse/online/lanc_conestoga.html. 213 Butrica, Andrew J., "The Commercial Launch Industry, Technological Change, and Government-Industry Relations," www.hq.nasa.gov/office/pao/History/X-33/butr02.htm. 214 Ibid. 215 More accurately, Orbital Transport und Raketen Aktiengesellschaft. 216 www.jcsw.com/john/Rocketry/otrag.html (attributed to Always, Peter, Rockets of the World, 3rd Ed.) 217 www.univ-perp.fr/fuseurop/otrag_e.htm.

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number of simple, pressure-fed rocket engines using nitric acid and kerosene

propellants, selected for their low cost and ease of handling. Each engine had its

own separate propellant tanks, and numerous modules were clustered together to

provide varying levels of performance. The vehicles were controlled via

independently throttling the clustered engine modules.

Besides being highly modularized, OTRAG rockets made use of as many

commercial off-the-shelf components as possible. The very low technology, high

weights of such rockets plays havoc with the exponential nature of rocket launch,

where the necessary change in speed required to reach orbital velocity is (to the first

order) an exponential function of the rocket’s initial to final weight ratio. Coupled

with such low specific impulse (efficiency) propellants, systems like OTRAG218 suffer

an unusually high performance penalty and thus require many more modules to be

used than necessary, increasing the overall system cost and complexity, and

reducing reliability.

In May 1977 and May 1978 OTRAG successfully flight-tested two small 6-meter

suborbital rockets in Zaire (now the Democratic Republic of Congo), reaching

altitudes of 20 and 30 km, respectfully.219 A larger, four-module, 12-meter high

suborbital test rocket failed in its launch in June 1978. Bizarre stories circulate today

about OTRAG and their relationship with the Zaire government, and a possible

secret German weapons program. OTRAG’s difficult political relationship with the

Zaire government allegedly eventually forced the company to relocate in Libya in

1979 where suborbital flight-tests were conducted in 1980. Some reports indicate

OTRAG had two unsuccessful flight tests there in 1981, and were actually working

with Libya to develop missiles.220 Once again forced to relocate, this time due to

political pressure from the German government and/or the United States, OTRAG

moved to Sweden. In September 1983 OTRAG conducted its last flight test in

Sweden’s Kiruna facility in 1983. The launch was a failure. Due to both technical

218 The American Scorpius rocket concept, for example. 219 www.univ-perp.fr/fuseurop/otrag_e.htm.

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and political problems OTRAG closed down in 1984 or 1987 (depending on the

source).

In a strange twist, Kayser surfaced again in May of 2000, claiming to have

finished the development and testing of his modular low-cost ELV and seeking

business partners to begin production.221

220 Federation of American Scientists, www.fas.org/irp/threat/missile/libya.htm. 221 Orbital Report News Agency, Space-Launcher.com, www.orbireport.com/News2000-05.html.

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5. Space Transportation Supply: Reusable Launch Vehicle

Programs & Concepts

This chapter contains an overview of RLV programs and concepts currently

under development, concentrating on small, private, entrepreneurial development of

reusable launch vehicles. Large corporate commercial RLV programs are examined

first, followed by the entrepreneurial RLV ventures, including a brief look at the X

PRIZE contestants. This is followed by an overview of United States government

RLV programs and international efforts.

As noted in Chapter 1, the scale and scope of this research effort did not allow

me to examine all of the RLV development efforts available in the literature. I thus

was forced to down-select from a larger population the programs and concepts I

found most interesting or relevant to this work as a whole. In the case of

entrepreneurial RLV ventures, I attempted to select the most mature concepts from

the literature.

Large Corporate Commercial RLV Programs

Not all of the commercial RLV developers are small entrepreneurial companies.

Lockheed Martin has been working over the past few years on its VentureStar RLV

design. The Boeing Company, Northrop Grumman, and Orbital Sciences have also

recently studied or are currently studying reusable launch vehicle system designs

and architectures under Air Force Military Spaceplane and NASA Space Launch

Initiative contracts, but at significantly lower levels of effort.

Lockheed Martin – VentureStar

Lockheed Martin has been (until very recently) developing the X-33 RLV

technology demonstrator with NASA in parallel with its planned follow-on single-

stage-to-orbit commercial RLV, the VentureStar. The purpose of the X-33 program

was to flight-test and demonstrate numerous advanced technologies required to

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develop a full-scale, orbit capable, RLV.222 At a cost of a little more than $1 billion,

the X-33 was supposed to be approximately a one-half linear scale of VentureStar.

Multi-year schedule slips and extensive cost overruns, partly due to significant

technical difficulties, recently caused NASA to cancel the X-33 program. The

technical difficulties included design and fabrication of the advanced technology

composite propellant tanks and the linear aerospike rocket engine, both critical to

the success of the VentureStar.

Lockheed Martin had estimated the cost to develop their VentureStar single-

stage-to-orbit commercial RLV in mid-1998 to be about $5 billion.223 This number

had already increased from a 1996 estimate of between $4.5 and $5 billion for a

fleet of two or three VentureStar RLVs.224 Over the following two years this number

climbed to at least $6 billion; some industry experts estimate the cost would be even

higher. Interestingly, as in the case of many of the entrepreneurs, the showstopper

for VentureStar (at least claimed by Lockheed Martin at one time) is financial rather

than technical. Lockheed Martin stated last year that their private VentureStar RLV

program could not obtain adequate financing from Wall Street without government

loan guarantees.225 Many believe VentureStar died with the death of the X-33

program.

Entrepreneurial Commercial RLV Ventures

Except for the partially reusable Space Shuttle system, every orbit capable rocket

today is an expendable launch vehicle. Yet many studies promise RLVs will

someday provide an order of magnitude decrease in cost and several orders of

magnitude increase in reliability and safety, in essence the “Holy Grail” of space

222 The X-33 program is discussed in more detail in Chapter 6. 223 “Lockheed Martin Sees Commercial Space Market Doubling by ’05,” Aerospace Daily, Vol. 187, No. 21, July 31, 1998, p. 174. 224 Gonzales, Daniel, et al., Proceedings of the RAND Project AIR FORCE Workshop on Transatmospheric Vehicles, RAND Corporation, Santa Monica, California, 1997. 225 “Loan Guarantees Required to Obtain VentureStar Financing, Lockheed Says,” Aerospace Daily, Vol. 190, No. 39, May 25, 1999, p. 1.

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transportation. It is no wonder that RLVs have been earnestly pursued in research

and development programs for approximately 40 years.

Unfortunately, successful development of reusable launch vehicles has proven to

be extremely difficult. Even with R&D investments collectively exceeding tens of

billions of dollars, no developmental RLV program has succeeded.226 Yet in the last

decade more than 15 small entrepreneurial RLV companies have formed, all vying

to do what governments and the aerospace giants such as Lockheed Martin and

Boeing have failed to do - develop a commercially viable RLV. This, in the face of a

Space Shuttle development bill of about $40 billion, the failure of the National Aero

Space Plane program to the tune of $3 billion, the recent failures of the X-33 and X-

34 programs at over $1.5 billion, as well as a host of other formidable deterrents.

And this, despite the fact that the past is littered with failed ELV entrepreneurial

efforts, a much less challenging development effort than that posed by an RLV.

The enthusiasm, creativity, courage, and commitment of these RLV

entrepreneurs are obvious, even if technical design viability remains elusive to

some. The odds are that most, if not all, of the current entrepreneurial RLV

development efforts will fail.227 Regardless, there is always a chance one of the

leading candidates will succeed. Certainly, the potential payoff is huge; a successful

RLV (in terms of cost effectiveness, safety, and reliability) would be a disruptive

product, revolutionizing the space launch and earning fame and wealth for the

winners, as well as a well-deserved place in history books alongside the likes of the

Wright brothers.

The entrepreneurial firms examined below are Kistler Aerospace Corporation,

Pioneer Rocketplane, Kelly Space and Technology, Rotary Rocket Company, and

Space Access, LLC. Kistler, Andrews Space & Technology, and Universal Space

Lines were all recently chosen for funding by an initial round of NASA’s Space

226 Recall that the Space Shuttle is a partially reusable system.

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Launch Initiative (SLI) program.228 Kelly, Pioneer, and Space Access were

reportedly passed over on this initial SLI phase.229

Of the following entrepreneurial companies, Kistler Aerospace Corporation

appears to be head and shoulders in front of the rest with respect to design maturity,

management team, capitalization, and fabrication. In addition, Kistler has been

generous in publishing conference papers, providing a large amount of information

about the company and its technical approach. For these reasons, my coverage of

Kistler in this thesis is appropriately deeper than my examination of other

entrepreneurial efforts.

Kistler Aerospace Corporation – K-1

For several years, Kistler Aerospace Corporation has been considered by many

industry experts to be the undisputed front-runner of the entrepreneurial reusable

launch vehicle development ventures. This is due to Kistler’s leadership in several

facets including system design viability, business plan, management team ability and

experience, percentage completion of prototype, and amount of capital obtained to

date. Due to their leadership position, Kistler is worth a closer look than the other

entrepreneurial RLV developers.

The K-1 RLV Concept

Kistler Aerospace Corporation is developing the K-1 reusable launch vehicle, a

two-stage-to-orbit, rocket that will be able to launch 4,500 kg (8,800 lb) into LEO.

The K-1 is designed to use as much off-the-shelf technology and components as

possible, for example using Aerojet AJ26 liquid oxygen / kerosene rocket engines

based on the venerable, reliable Russian NK-33 and -43 engines.230 The K-1 will

227 Note that in addition to the hurdles mentioned here, statistically very few new business starts succeed. 228 Berger, Brian, “Rocket Entrepreneurs Take Share of Early SLI Funding,” Space News, SpaceNews.com, March 6, 2001. 229 Ibid. 230 Associate Administrator for Commercial Space Transportation (AST), Reusable Launch Vehicles & Spaceports: Programs & Concepts for 2001, Federal Aviation Administration, January 2001, www.ast.faa.gov.

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launch vertically, and the first stage, the Launch Assist Platform, is recovered using

an innovative approach: after stage separation one of the Launch Assist Platform’s

three AJ26 rocket engines is re-ignited and the stage flies a return trajectory to a

designated landing site not far from the launch site. Parachutes are deployed after

engine shut-off to slow the decent, and air bags are used to soften the landing.

Upon reaching orbit, the second stage, or Orbital Vehicle, releases the payload and

remains in LEO for approximately a day, waiting for the Earth’s rotation to provide

the correct ground trace before reentering the Earth’s atmosphere. Like the first

stage, the Orbital Vehicle utilizes parachutes and airbags during recovery.

When fully developed, Kistler Aerospace Corporation expects to able to offer a

price of $17 million per launch, more than 50% less than current Western launcher

prices, allowing the company to meet government-supported competition from

Russia, Ukraine, and China.231 Kistler also plans for a remarkable nine-day turn-

around time. With a fleet of five vehicles, Kistler anticipates being able to launch

with as short notice as three days, an unprecedented responsiveness for a space

launch vehicle. Kistler plans to launch from the Woomera, South Australia

spaceport, but has also worked towards establishing a second spaceport in Nevada

to support additional capacity if needed.

While primarily focused on LEO missions, Kistler has also completed a

conceptual design for an additional upper stage or “Active Dispenser.” The Active

Dispenser would propel payloads to medium Earth orbit, geosynchronous transfer

orbit (GTO), or an interplanetary orbit, allowing the K-1 to deliver 1,570 kg (3,450 lb)

to GTO for approximately $25 million.232 Kistler is also working with Astrium Ltd. to

examine development of a reusable payload dispenser for launching multiple small

231 Mueller, George, Written Statement of Kistler Aerospace Corporation, Presented at the “Commercial Spaceplanes” hearing to the House Subcommittee on Space and Aeronautics, U.S. Congress, 13 October 1999, www.house.gov/science/. 232 Associate Administrator for Commercial Space Transportation (AST), Reusable Launch Vehicles & Spaceports: Programs & Concepts for 2001, Federal Aviation Administration, January 2001, www.ast.faa.gov.

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payloads, based on a similar expendable dispenser Astrium created for the Ariane 4

and Ariane 5 ELVs.233

In his October 1999 conference paper, Kistler Aerospace Corporation’s CEO Dr.

George Mueller reported that the first K-1 vehicle is in final assembly with 75% of the

vehicle manufactured.234 Mueller also noted that at that point Kistler had secured

over $500 million of private financing, and planned to conduct their first launch flight

test in 2000. However, financing problems have stalled completion of the prototype

K-1 to this day.

The Business

Walter Kistler and Bob Citron founded Kistler Aerospace Corporation in 1993.235

Unlike many, perhaps even most, current RLV entrepreneurial efforts, the founders

both had successful prior experiences of establishing and managing high

technology, entrepreneurial ventures. Kistler Aerospace built an impressive, highly

experienced management and technical team,236 maintaining a small, flexible staff of

less than 50 employees, and incorporating a horizontal management structure.237

The company’s undeviating focus from the start was on commercial launch, and

developing the world’s first true RLV.

Kistler has made extensive use of expert contractors to design and manufacture

K-1 components, including Lockheed Martin, Northrop Grumman, GenCorp Aerojet,

Draper Laboratory, AlliedSignal Aerospace, Irvin Aerospace, and Oceaneering

Space Systems.238 Kistler has also employed an integrated product team system

233 Ibid. 234 Mueller, G.E, et al., “Building The K-1 Reusable Aerospace Vehicle As A Commercial Venture,” 50th International Astronautical Congress, Amsterdam, The Netherlands, October 4 - 8, 1999. 235 Ibid. 236 CEO George Mueller, for example, was former head of NASA’s Manned Space Flight Program throughout much of the 1960’s Apollo era. 237 Mueller, G.E, et al., “Building The K-1 Reusable Aerospace Vehicle As A Commercial Venture,” 50th International Astronautical Congress, Amsterdam, The Netherlands, October 4 - 8, 1999. 238 Mueller, George, Written Statement of Kistler Aerospace Corporation, Presented at the “Commercial Spaceplanes” hearing to the House Subcommittee on Space and Aeronautics, U.S. Congress, 13 October 1999, www.house.gov/science/

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development approach where contractor representatives actively participate and

work closely with Kistler employees. Kistler’s contractors were involved in writing

realistic requirements and specifications, and were brought in early into the

development process. Kistler’s development philosophy as given by Mueller is: 239

• Use of proven technologies to reduce research, development, test, and

evaluation time, cost, and risk as well as increase reliability. This includes

use of the best available systems, such as the Russian engine technology.

• Full reusability to reduce costs (amortization of the K-1 costs over many

flights), increase reliability (reuse of flight-proven systems and subsystems),

and increase launch schedule flexibility and response time (by deleting long

lead-time manufacturing from the operations timetable).

• Modular construction with liberal use of line replaceable units to reduce

manufacturing and operation costs and time, and increase reliability.

• Use of commercial practices (to reduce development cost and time), enabled

by all private financing.

Mueller states that totally private financing permitted Kistler to employ a number

of advantageous commercial business practices in their system development.240

Analogous government programs require compliance with Federal Acquisition

Regulations, which, for example, dictate use of time-consuming competitive

procurement processes for contracting. In contrast, Kistler Aerospace Corporation

freely selected businesses that are leaders in their respective technologies, and

directly negotiated contracts. This and other like practices, contends Mueller,

resulted in an accelerated development program schedule and significant cost

savings for both Kistler and its contractors.

Kistler Finances

Apparently, Kistler has been in financial limbo since 1998, attempting

unsuccessfully to find additional private financing to complete the first K-1. A

239 Mueller, G.E, et al., “Building The K-1 Reusable Aerospace Vehicle As A Commercial Venture,” 50th International Astronautical Congress, Amsterdam, The Netherlands, October 4 - 8, 1999. 240 Ibid.

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September 2000 article in The Seattle Times by Chuck Taylor reported that Kistler

Aerospace had raised and spent $600 million and needed another $500 million to

finish development and flight test of the prototype K-1.241 In 1999 Kistler contractor

Northrop Grumman reportedly forgave a $30 million bill in exchange for equity in the

company. Kistler has apparently been stymied by three financial roadblocks: a

vanished high-yield debt market, much lower than expected demand for LEO

commercial launches, and the dot-com investment craze.242

Taylor also reports that Kistler was recently awarded a $264,000 contract with

NASA to study use of the K-1 for the International Space Station supply missions.243

NASA is examining launcher options in addition to the Space Shuttle as insurance to

congressional concern that Russian may not be able to afford their launch

commitments to re-supply ISS. As noted in Section 3, however, impositions on an

RLV system requirements by the ISS supply mission might require significant design

modifications, potentially a very expensive proposition in terms of both cost and

schedule. Kistler Aerospace Corporation’s CEO, Dr. George Mueller, thinks that

even a NASA endorsement of the K-1’s utility - even if not a service contract - could

spark additional private investment in the company.244

Current Situation

More recent developments, however, indicate an even grimmer financial picture.

In February 2001, at the time this was written, Kistler Aerospace Corporation is in

the midst of restructuring in an attempt to raise $700 million to meet its financing

needs through its projected point of positive cash flow.245 Bay Harbour Management

L.C. is apparently considering providing Kistler $385 million in exchange for 72%

equity in the company. Under the terms of the deal, some existing shareholders

241 Taylor, Chuck, “Half a Billion Shy of Building a Better Rocket,” The Seattle Times, September 5, 2000. 242 Ibid. At least the latter roadblock has disappeared. 243 Taylor, Chuck, “Half a Billion Shy of Building a Better Rocket,” The Seattle Times, September 5, 2000. 244 Ibid. 245 “Reusable Launch Vehicle Developers Face Major Financial Barriers, Wary Investors,” Satellite News, Vol. 24, No. 7, February 12, 2001.

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who agreed to extend and increase Kistler’s $180.5 million line of credit will be

offered 10% of the restructured company, while the remaining 18% of equity will go

to existing shareholders, investment bankers, and Bay Harbour. This appears to be

a major dilution of current shareholders equity. Kistler contractors will also be

offered restructured debt or equity in exchange for its approximately $85 million in

outstanding accounts payable.246

Pioneer Rocketplane - Pathfinder

Pioneer Rocketplane’s Pathfinder concept is a winged, piloted, reusable first

stage of a two-stage-to-orbit system. The Pathfinder takes off horizontally from a

conventional runway with a full complement of kerosene but with only a partial load

of liquid oxygen aboard. The Pathfinder climbs using its two General Electric F404

turbofan engines and meets up with a modified KC-135 tanker aircraft. Analogous to

standard aerial refueling, aerial propellant transfer occurs between the two aircraft,

transferring about 130,000 lb of liquid oxygen from the KC-135 tanker to the

Pathfinder’s tanks. After disconnecting from the tanker, the Pathfinder’s RD-120

kerosene / liquid oxygen rocket engine propels it into space on a suborbital

trajectory. At an altitude of about 75 miles, the Pathfinder releases a liquid

expendable upper stage that propels the payload into orbit. After reentry

deceleration to subsonic speeds, the Pathfinder restarts its turbofans and makes a

powered landing. Payload capability is from 5,000 - 7,000 lb to LEO.

The Pathfinder concept traces its roots back to the Air Force Research

Laboratory’s “Black Horse” military spaceplane concept from the mid-1990s,

developed by Pioneer Rocketplane CEO, Mitchell Clapp, while in the USAF. (Other

references indicate the Black Horse concept may have had its origins from an older

aerial propellant transfer conceptual design study from Aerospace Corporation,247 or

perhaps from former Pioneer Rocketplane partner, Bob Zubrin, who developed his

246 Ibid. 247 Personal discussions with Aerospace Corporation’s Jay Penn, circa 1997.

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“Black Colt” concept while an employee of Martin Marietta in 1993 and 1994.248)

The company bid unsuccessfully for NASA’s X-34 project, but subsequent concept

development was funded under the NASA Low Cost Boost Technology Program, as

well as multiple grants from the state of California where the company is

headquartered.249

Pioneer attributes aerial propellant transfer to giving their RLV vast

improvements in safety, operational flexibility, and cost, enabling new market

opportunities including passenger service from point-to-point on Earth, suborbital

space tourism, and fast package delivery.250 The Pathfinder concept extensively

leverages existing technologies, and employs commercial-off-the-shelf components

wherever possible. Pioneer Rocketplane anticipates pricing satellite launches in the

range from $7 to 10 million per flight, a fraction of the price charged by today’s ELVs.

Development of the Pathfinder RLV was estimated in 1998 to cost about $275

million.251

In September 2000, Pioneer signed a memorandum of understanding with the

Oklahoma Space Industry Development Authority. With this agreement, Pioneer will

conduct operations from the proposed Oklahoma Spaceport in Washita County,

Oklahoma, in exchange for up to $300 million in revenue bond financing to help

develop the Pathfinder concept.252

248 Iannotta, Ben, “Small Start-ups Vie for Big Business,” Aerospace America, August 1998, p. 34. 249 Associate Administrator for Commercial Space Transportation (AST), Reusable Launch Vehicles & Spaceports: Programs & Concepts for 2001, Federal Aviation Administration, January 2001, www.ast.faa.gov. 250 Clapp, Mitchell Burnside, Testimony at the “Commercial Spaceplanes” hearing to the House Subcommittee on Space and Aeronautics, U.S. Congress, 13 October 1999, www.house.gov/science/ 251 Iannotta, Ben, “Small Start-ups Vie for Big Business,” Aerospace America, August 1998, p. 34. 252 Associate Administrator for Commercial Space Transportation (AST), Reusable Launch Vehicles & Spaceports: Programs & Concepts for 2001, Federal Aviation Administration, January 2001, www.ast.faa.gov.

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Space Access, LLC - SA-1

Founded in 1994, Space Access, LLC has been among the more stealthy

entrepreneurial RLV development ventures, rarely presenting business or system

design information in a public forum. Space Access’s SA-1 concept is an

unmanned, multi-stage reusable launch vehicle that will be able to deliver a wide

range of payloads into low, medium, and geosynchronous Earth orbits. The RLV

takes off horizontally from a conventional runway, powered by a hybrid propulsion

system utilizing liquid hydrogen and atmospheric oxygen in the first stage. This

propulsion system includes a proprietary modification to an ejector ramjet design

that was developed and first demonstrated in ground tests more than 30 years ago.

A single rocket powered upper stage is used to deliver up to 15,000 kg (33,000 lb) to

LEO; a second rocket powered upper stage delivers about 5,200 kg (11,400 lb) to

GTO.253 All three stages are completely reusable and are recovered via horizontal

landings at the original launch site. Space Access has reportedly studied developing

a crewed version of its second stage under contract with NASA.254

In contrast to most of its RLV brethren, the SA-1 is significantly larger and does

not adhere to the philosophy of strict use of commercial off-the-shelf components or

even current technology, as evidenced by their development of new propulsion and

thermal protection system technologies. Although originally designed for LEO

missions, Space Access has reacted to the soft LEO market and now lists GTO

missions as the system's market focus, and is considering ISS re-supply missions as

well. As late as 1998, Space Access stated that flight tests of the SA-1 would begin

in 2001, and the system would be operational by 2002.255 The author does not know

Space Access’s current status.

Kelly Space and Technology – 2nd Generation RLV System / Astroliner

Kelly Space and Technology was founded in San Bernardino, California in 1993

by Mike Kelly and Mike Gallo. Their goal was to “develop significantly less

253 Ibid. 254 Ibid.

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expensive, safer, more reliably performing and frequently operated Space Launch

Vehicles.”256 Privately financed, Kelly has been working on their piloted horizontal

takeoff, horizontal landing RLV concept capable of inserting 10,500 lb into LEO.

Kelly plans to develop a two-stage-to-orbit system, with a reusable first stage

called the Astroliner and an expendable upper stage. Kelly uses a “Tow to Launch

Site” approach, where the Astroliner would be towed into the air from a conventional

runway by a modified Boeing 747 aircraft.257 The Astroliner incorporates rockets as

well as F100 jet engines, with the latter used to supplement the 747’s thrust early in

the trajectory. At about 20,000 feet altitude, the Astroliner is released from the tow

tether, and it ascends under rocket power to the stage separation point, at an

altitude of about 400,000 feet.258 After stage separation, the Astroliner reenters the

atmosphere and performs a powered horizontal landing on a conventional runway.

Kelly Space and Technology has been awarded a U.S. patent for their tow

technique, which they claim will eliminate substantial ground facility infrastructure,

saving costs as well as increasing reliability and safety. Kelly successfully tested

their RLV tow techniques in 1997 and 1998 with scale flight tests at Edwards Air

Force Base in California using a modified QF-106 aircraft towed into the air by a C-

141A airplane.

Like Kistler, Kelly Space and Technology has reacted to the softening LEO

market over the past few years by refocusing the development effort from primarily a

LEO launch service (the Astroliner concept) to a much broader market. Reportedly,

Kelly is now aiming to provide launch of cargo to suborbital, low, medium, and

geosynchronous orbits, and cargo and personnel to the International Space Station

255 Iannotta, Ben, “Small Start-ups Vie for Big Business,” Aerospace America, August 1998, p. 34. 256 Davis, Robert, Testimony on Commercial Spaceplanes, Presented at the “Commercial Spaceplanes” hearing to the House Subcommittee on Space and Aeronautics, U.S. Congress, 13 October 1999, www.house.gov/science/ 257 Ibid. 258 Iannotta, Ben, “Small Start-ups Vie for Big Business,” Aerospace America, August 1998, p. 34.

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with their “Second Generation Launch System.”259 To do so Kelly plans to develop

several different upper stage concepts. Among these are an unmanned, cargo

delivery, reusable upper stage, and a seven person Crew Transfer Vehicle.

NASA has sponsored Kelly for several studies over the past few years on

NASA’s Second Generation RLV program. Kelly recently announced it would team

with Vought Aircraft Industries to work on their second generation RLV concept.260

In the past, Kelly Space and Technology has reported to need a mere $450

million to develop their Astroliner RLV.261 Sources report that Kelly had spent only

about $10 million as of May 1999, indicating the concept’s immaturity. As late as

last year, Kelly planned to first launch the Astroliner in 2002, but more recently

pushed the first launch of their Second Generation Launch System to sometime after

2006.262

Failed Entrepreneurial RLV Efforts

With the zeal and optimism for the current ELV and RLV entrepreneurial ventures

so prevalent in the literature today one might think their ilk has never been before

seen in the aerospace industry. But then one would be ignoring the periodicity that

at times seems to tirelessly affect every facet of the aerospace industry. The fact is

that developing an orbital ELV system is extremely difficult and risky. It has been

attempted numerous times before by ELV entrepreneurs, every one a failure. Beal

Aerospace, American Rocket Company, Starstruck, Transpace Carriers, E’Prime

Aerospace Corporation, Space Services, Conatec, OTRAG, and others all wanted to

change the world. A very sobering consideration is that developing a reusable

259 Associate Administrator for Commercial Space Transportation (AST), Reusable Launch Vehicles & Spaceports: Programs & Concepts for 2001, Federal Aviation Administration, January 2001, www.ast.faa.gov. 260 “Kelly and Vought Team Up For New Spaceplane,” SPACEDAILY, January 23, 2001. 261 Iannotta, Ben, “Small Start-ups Vie for Big Business,” Aerospace America, August 1998, p. 34. 262 Associate Administrator for Commercial Space Transportation (AST), Reusable Launch Vehicles & Spaceports: Programs & Concepts for 2001, Federal Aviation Administration, January 2001, www.ast.faa.gov.

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launch vehicle is so much more difficult than on ELV, in terms of technical risk,

funding magnitude, and development time.

The current wave of entrepreneurial RLV ventures were almost all started in the

mid-1990s, originally bolstered by a bullish, even exuberant, LEO communications

satellite market that appeared to underestimate the threat of fiber optics. With the

bankruptcies or deep financial straits experienced by Iridium, ICO, Orbcomm,

Globalstar and others, the LEO market has since declined. Rotary Rocket is the first

of this wave to fall;263 additional RLV entrepreneurial ventures will likely soon follow

its lead.

Rotary Rocket Company – Roton, 1996 - 2000

Rotary Rocket Company began development of their Roton RLV concept in

1996, but experienced great difficulty in raising capital throughout its existence. In

June 1999, for example, Rotary announced layoffs and restructuring, dropping about

60% of its workforce.264 Rotary ceased engineering and development work on their

RLV last summer, and CEO Gary Hudson resigned. At the end of 2000 Rotary

Rocket Company mothballed the organization indefinitely.265 The company had

raised about $30 million266 (of which $1 million is said to have been invested by

famous author Tom Clancy) but supposedly needed an additional $150 million to

complete the project.267 Rotary barely managed to avoid auction of its property at

Mojave Airport in Kern County, California early this year by paying delinquent 2000

taxes at the last moment.268

263 The status of Rotary is actually somewhat ambiguous. Although the literature implies the company has dissolved, it may actually be only currently “mothballed.” 264 Lindsay, Clark S, Editor, Reusable Launch Vehicle Information Web Site, www.hobbyspace.com/Links/RLVCountdown.html. 265 Associate Administrator for Commercial Space Transportation (AST), Reusable Launch Vehicles & Spaceports: Programs & Concepts for 2001, Federal Aviation Administration, January 2001, www.ast.faa.gov. 266 Lindsay, Clark S, Editor, Reusable Launch Vehicle Information Web Site, www.hobbyspace.com/Links/RLVCountdown.html. 267 Bedell, Christine, “Delinquent Rocket Firm Sends Cash, Insults to Kern,” The Bakersfield Californian, December 28, 2000.

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The Roton is a single-stage-to-orbit RLV concept designed for launching LEO

satellites as well as transferring crew to and from the International Space Station.

The vertical takeoff Roton concept ascended to orbit using conventional liquid

oxygen / kerosene rocket engines, and landed vertically like a helicopter but using

an innovative powered rotor system. Folded during ascent for low drag, the rotor

blades deployed after reentry into the atmosphere, and were powered by small

hydrogen peroxide / methanol rocket engines built into the blade tips. Rotary Rocket

Company originally planned to design, develop and use their proprietary RocketJet

rocket engines, but later abandoned this avenue in favor of a derivative of the liquid

oxygen / kerosene Fastrac rocket engine developed in-house at NASA Marshall

Space Flight Center. Ironically, Rotary attributed this decision to an attempt to

reduce development time and technical risk. With the problems NASA has

experienced with their Fastrac engines, however, this may have been an unfortunate

strategy had Rotary been able to acquire the capital to continue operations.

Rotary Rocket Company completed construction of a manufacturing and flight

operations facility at the Mojave Airport in California in January 1999. There they

built and flight-tested a low speed, full-scale, 64 foot tall vehicle prototype, the Roton

Atmospheric Test Vehicle (ATV). In three flight tests, the ATV successfully

demonstrating approach and landing flight characteristics.269

The X PRIZE Competitors

As discussed in Chapter 3, space tourism has the potential to be a large

emerging market, an industry with economic value that could someday dwarf all of

our present commercial space endeavors. A common premise in the literature is

that space tourism will drive entrepreneurial development of successive generations

of lower and lower cost RLVs, breaking the current paradigm that space travel is

only the venue of governments and their large aerospace contractors. All that is

268 Ibid. 269 Associate Administrator for Commercial Space Transportation (AST), Reusable Launch Vehicles & Spaceports: Programs & Concepts for 2001, Federal Aviation Administration, January 2001, www.ast.faa.gov.

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needed, the argument goes, is a privately developed, passenger carrying, suborbital

reusable launch vehicle to start the ball rolling. It is no surprise then that space

tourism is the primary market focus for many current RLV entrepreneurial ventures.

The X PRIZE Foundation, a nonprofit organization, was established in 1994 to

inspire such development through creating a $10 million international prize to be

awarded to the first privately funded person or team who safely travels to and from

space. Rules dictate the vehicle must demonstrate the ability to fly three persons on

a suborbital flight to an altitude of 100 km, as well as fly twice within a two-week

span. Some 20 international teams have registered to compete since the X PRIZE

was publicly announced in 1996.270 Modeled after the hundreds of early aviation

prizes offered between 1905 and 1935 which successfully stimulated a plethora of

new aircraft designs, the X PRIZE aims to prompt development of space tourism

primarily through entrepreneurial development of relatively low technology,

suborbital271 RLVs that would enable space tourism affordable to the general

public.272

The X PRIZE foundation lists the following categories of public benefits to be

gained from the technologies and other outcomes resulting from the X PRIZE:273

• Rapid transportation point-to-point on Earth - for both cargo and passengers.

• Access to space – advancing telecommunications and enabling access to

space resources.

• Philosophical and motivational benefits – changing personal worldviews,

generating heroes, and promoting education.

270 X Prize Foundation Web Site, www.xprize.org, January 2001. 271 I use the phrase “low technology, suborbital” rather loosely. The prize can be won by a suborbital RLV rather than a higher performance, orbit capable RLV. The former would require significantly less technological sophistication than its orbit-capable counterpart. 272 X Prize Foundation Web Site, www.xprize.org, January 2001. 273 Diamandis, P, and Maryniak, G, “The X Prize Competition: Creating a New Generation of Reusable, Passenger-Carrying Spaceships,” IAF Paper 98-1501, 49th International Astronautical Congress, Melbourne, Australia, September 28 - October 2, 1998.

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The following is a list of current registered entrants, followed by the name of their

RLV concept:274

• Advent Launch Services - Advent

• AeroAstro, LLC - PA-X2

• Mr. Mickey L. Badgero - Lucky Seven

• Bristol Spaceplanes, Ltd. (England) - Ascender

• Canadian Arrow (Canada) - Canadian Arrow

• Cerulean Freight Forwarding Company - Kitten

• CosmopolisXXI (Russia) - CosmopolisXXI

• The daVinci Project (Canada) - daVinci

• Discraft Corporation - The Space Tourist

• Graham Dorrington (England) - Green Arrow

• Earth Space Transport System Corporation

• Kelly Space and Technology - Eclipse Astroliner

• Lone Star Space Access Corporation - Cosmos Mariner

• Pablo De Leon & Associates (Argentina) - Gauchito

• Pan Aero, Inc. - XVan2001

• Pioneer Rocketplane, Inc. - Pathfinder

• Scaled Composites, Inc. - Proteus

• Starchaser Foundation (England) - Thunderbird

• TGV Rockets - Michelle-B

The sophistication of these concepts appears to vary widely, ranging from some

that can only be politely described as “interesting” to others that seem technically

viable and very innovative.

The Starchaser Foundation team and the Pablo de Leon and Associates were

reportedly actively involved last year in testing system components, Starchaser

testing a launch escape system and avionics for their Thunderbird concept with a

274 Ibid.

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two-stage rocket test launch and Pablo de Leon and Associates testing subscale

hybrid rocket motors for their Gauchito concept.275

It will be very interesting to witness the eventual affect the X PRIZE has on RLV

development. Will the X PRIZE act as a critical catalyst or will it have no lasting or

appreciable effect? Supporters are quick to argue that the great success of

analogous prizes in the aircraft industry in prompting innovative airplane

development in the first few decades of the twentieth century will translate easily into

RLV development. Yet skeptics contend that the levels of technological

sophistication and capital required to successfully develop an aircraft 90 years ago is

far, far less than that required today, and even further removed from that required to

develop a viable manned RLV. In truth, while the image of creative inventors who

produced wildly successful, disruptive products working out of a bicycle shop in

Dayton, Ohio or out of a one-car garage in Palo Alto, California276 is romantic and

compelling, today it is very rare indeed, especially in the technologically complex

and high cost aerospace industry. The Boeing 777 aircraft, for example, has over

85,000 components and over four million parts, requiring the expertise of thousands

of specialized engineers. It was not designed and developed out of a garage, small

shop, or basement. The capital required to undertake major aerospace

development efforts has risen dramatically too; ESA’s cost to develop the Ariane 5

ELV, a derivative of their Ariane 4 launcher, has been estimated at $9 billion,

including required spaceport infrastructure. It seems doubtful that a small

entrepreneurial private firm could succeed in developing a successful RLV where

industry giants such as Boeing and Lockheed have failed. Yet it would not be

prudent to rule them out either; improbable is not impossible.

Another skepticism against the X PRIZE’s effectiveness is the magnitude of the

prize amount. With the cost of developing unmanned ELVs typically in the billions of

275 Associate Administrator for Commercial Space Transportation (AST), Reusable Launch Vehicles & Spaceports: Programs & Concepts for 2001, Federal Aviation Administration, January 2001, www.ast.faa.gov. 276 Orville and Wilbur Wright, and Bill Hewlett and Dave Packard, respectively.

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dollars, far exceeding what a small group of entrepreneurs can usually generate, is

there an adequate economic incentive behind a mere ten million dollar prize? One

might argue that the prize would have to be increased to at least an order of

magnitude to have a significant effect on encouraging a large number of high quality

entrants, entrants with the appropriate level of funding to contract out for the

technologies they need help developing.

Perhaps one of the most important outcomes of the X PRIZE will be the focus

they are providing on incremental development of reusable launch vehicles. Rather

than requiring orbital RLV flight to win the prize, it can be won by the relatively

modest accomplishment of a suborbital flight. By this approach, the X PRIZE

Foundation is wisely encouraging a stepping-stone, evolutionary development for

full-scale, orbit-capable RLVs, and thus increasing the likelihood of success. This

circumvention of the time-honored but almost always failing technology “leap-frog” or

revolutionary approach is both pragmatic and admirable.

U.S. Government Reusable Launch Vehicle Programs

NASA’s “1st Generation” RLV: The Space Shuttle

The Space Shuttle, or Space Transportation System (STS), is composed of a

reusable delta-wing spacecraft called the orbiter, two solid propellant rocket

boosters, and a large expendable tank carried externally. Often called a first

generation reusable launch vehicle, the Space Shuttle277 is actually only partially

reusable – the large external tank is emptied and discarded during launch just shy of

orbit. After separation, the external tank reenters the atmosphere and either burns

up or crashes into the sea. The two solid rocket boosters are thrown away early in

the launch, parachuting into the ocean where they are recovered, refurbished and

rebuilt, and eventually reused up to 25 times each. After dropping the solid rocket

boosters and the large external tank, the Space Shuttle orbiter travels on to orbit.

The Space Shuttle (Figure 4) can remain in orbit for extended periods of time,

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allowing its astronauts to complete a wide variety of missions including payload

deployment and recovery, satellite repair, scientific experimentation, and lately, ISS

construction. Upon mission completion the orbiter reenters the atmosphere and

lands. An enormously expensive repair and refurbishment program is then

undertaken to prepare the orbiter for its next launch.278 Future missions include

additional International Space Station construction and re-supply, which should

preoccupy the system through the next five to ten years.

Figure 4 Space Shuttle Landing (Photograph compliments NASA)

The first of its kind, the partially reusable Space Shuttle system is the nearest

forerunner to the revolutionary RLVs of tomorrow. The Shuttle provides an

impressive capability and versatility for placing humans and satellites in orbit, and it

frequently acts as a temporary space station, hosting numerous experiments and

tests. Currently, the Shuttle is the only man-rated launch system in the West, and it

has been the sole mode of human transport to space for the United States since

277 Here and elsewhere in this thesis I use “Space Shuttle” to indicate the United State’s version. Note that the Soviet Union also developed a space shuttle system, the Energia-Buran Reusable Space System, which was nearly a U.S. Space Shuttle clone and is not operational. 278 A few flights required more than a staggering 30,000 man-hours merely to refurbish the thermal protection system between flights.

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1981. However, the Space Shuttle system is by far the most expensive launch

system in the world, with a publicized cost per pound of payload delivered to low

Earth orbit of approximately $10,000 per pound. In contrast, modern unmanned

expendable launch vehicles currently cost from about $3,000 to $8,000 per pound to

low Earth orbit. In addition, the Shuttle fleet is capable of only infrequent launch

operations, approximately half a dozen to a dozen launches per year. The very high

costs and low launch frequency of the Shuttle system hence make it a very

ineffective for the “space truck” mission for which it was originally intended.

Interestingly, the original estimated cost for shuttle launch was about $100 per

pound to LEO per flight,279 and the initial launch was planned for 1978, with a flight

rate of about 50 launches per year.280 First flight occurred in April 1981 after a four-

year delay due to funding shortfalls and technical problems with the engine and

thermal protection system development.281 A couple of years ago, before ISS

spending ballooned, space launch (primarily the Space Shuttle) ate roughly 25% of

NASA’s budget.282

The additional system complexity and weight required to carry astronauts, as well

as it being the first of its kind, translate into very high fixed and recurring costs for

the Shuttle system. NASA published total average costs per flight for the Space

Shuttle for fiscal years 1996, 1997, and 1998, were $590 million, $380 million, and

$409 million, respectively. In fiscal year 1999, however, due to required repairs on

the Shuttle fleet there were only three flights to amortize that year’s approximately

$3.1 billion Shuttle operations budget, giving an average cost per flight of about

$1000 million, or roughly $20,000 per pound to low Earth orbit.283 Development

costs for the Shuttle are as impressive as its launch costs. Total cost in fiscal year

279 Cole, Bob, The Prospects for U.S. Ventures in Space Launch, IC2 Institute, The University of Texas at Austin, 1989. 280 Teal Group Corporation, World Space Systems Briefing: Space Shuttle, June 2000, www.tealgroup.com. 281 Ibid. 282 McWilliams, James, “Bold Steps for Space Travel Are On Horizon,” The Huntsville Times, October 28, 1999. 283 There are 7 to 8 Shuttle flights in a typical fiscal year.

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2000 dollars for the design and development of the first four Space Shuttles was

about $40 billion.284

"Thirty years ago, President Richard Nixon initiated the Space Shuttle

program as the ’next big project’ for NASA after Apollo. But instead on

delivering the promised ’space truck’ that would fly 50 times per year

for perhaps $10 million a flight, NASA built a complicated vehicle that

still requires 20,000 people to fly at 1/10 as much per year for fifty

times as much cost."

- Space Frontier Foundation285

Some lay the blame for Space Shuttle deficiencies on its design that was

allegedly compromised in attempt to acquire the political support of key users - in

particular extended growth of the system’s payload capability in order to handle

heavy lift Department of Defense surveillance satellites. Others lay the guilt on a

shortage of development funds that forced the program office to select only a

partially reusable design, essentially trading significant up-front development costs

required to make the system completely reusable for higher recurring costs.

The 100th STS flight took place in October 2000. With a fleet of four vehicles,

each with a 100 flight lifetime, the Space Shuttle system could possibly keep flying

for another 20 to 30 years, especially if NASA continues to upgrade the vehicles on

a regular basis.286 However, its great expense may drive NASA to pursue a

replacement long before then.

In 1996, United Space Alliance (USA) took over the everyday operations and

management of the Space Shuttle fleet under a six-year contract with NASA. USA,

284 Mulville, Daniel, Statement of Daniel Mulville, Chief Engineer, Office of the Administrator, NASA, at the “Space Transportation Architecture Studies: The Future of Earth-to-Orbit Spaceflight” hearing to the House Subcommittee on Space and Aeronautics, U.S. Congress, 27 October 1999, www.house.gov/science/. 285 Space Frontier Foundation Press Release, "Space Frontier Foundation Ridicules NASA for Praising and Perpetuating Expensive Socialist Spaceflight Monopoly," October 5, 2000, 140

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a joint venture between Lockheed Martin Corporation and Rockwell International

(now, The Boeing Company), also acquired USBI Company in October 1999,

obtaining accountability for the assembly, test, and refurbishment of the Solid Rocket

Boosters.287 USA claims they have successfully reduced the overall cost of the

Space Shuttle program nearly $300 million in the first two years of their contract,

from fiscal years 1996 to 1998 while meeting all mission objectives and maintaining

safety and reliability as top priorities.288

A solid examination of issues in privatizing the Space Shuttle is presented in a

2000 article by Hertzfeld.289 In this work he concludes that although privatization of

the Space Shuttle is possible, government safety rules (primarily due to the system

being manned) make the system too expensive to form a viable business without

government subsides. He also observes that the Shuttle was not designed for

commercial operations, and that its primary utility over the next few years is

International Space Station completion and maintenance.

NASA’s SLI Program: 2nd Generation RLV Program

“At this juncture, there is no market driven business case for a human-

rated launch system.”

- U.S. Congressmen Dana Rohrabacher 290

NASA’s lists its goal for the Space Launch Initiative (SLI) as substantially

reducing the technical, programmatic and business risks associated with developing

a safe, reliable, and affordable 2nd Generation RLV. The intent of the SLI program

286 At the current scheduled rate of 8 to 10 flights per year, and barring any major accidents, the STS could conceivably keep flying until beyond 2030. Note that the B-52 has set this precedent. It first flew in March of 1961, and will likely fly for another decade or more for the USAF. 287 Associate Administrator for Commercial Space Transportation (AST), Reusable Launch Vehicles & Spaceports: Programs & Concepts for 2001, Federal Aviation Administration, January 2001, www.ast.faa.gov. 288 www.unitedspacealliance.com/about/. 289 Hertzfeld, Henry R, “Issues in Privatizing the Space Shuttle,” AIAA Paper 2000-5123, AIAA Space 2000 Conference and Exposition, Long Beach, CA, September 19 - 21, 2000. 290 Rohrabacher, Dana, “NASA’s Space Launch Initiative Is Off Course,” Aviation Week & Space Technology, February 19, 2001, www.aviationnow.com.

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is to develop 2nd generation RLV architecture options to enable a launch services

competition in 2005 that would meet NASA’s human space flight operational needs

by 2010.291

NASA currently plans to replace the Space Shuttle system with either a new,

Shuttle-derived launch vehicle or a “clean sheet designed” RLV, developed and

operated by industry.292 NASA has targeted either 2010 or 2012 (depending on the

source) for initial operations of this system and has already invested heavily in RLV

technologies and experimental flight demonstrators, including the X-33, X-34, and X-

37 programs. NASA has spent more than a billion dollars in this area over the last

few years and intends to spend more than $4.5 billion over the next five years under

the Space Launch Initiative program to continue this work. As noted above, as of

the end of 2000 NASA’s plan was to make a decision in 2005 whether or not to

initiate the Space Shuttle replacement program.

SLI has provoked intense controversy. A great debate rages on whether to

upgrade the Shuttle, an outrageously expensive yet working system with a unique

capability to carry astronauts, or to risk many billions of dollars on yet another

development program – in the wake of a number of false starts and cancelled

programs for lack of schedule, cost, and or technical progress such as the reported

$3 billion shelled out on NASP, more than $1.5 billion spent on X-33 and X-34, and

nearly $1 billion spent on the Space Transportation Main Engine293 over the last

decade in a half with little produced.294

U.S. Congressmen Dana Rohrabacher (R-Calif.), Chairman of the House

Science Space and Aeronautics Subcommittee, said recently that he will hold

hearings to ensure NASA properly spends SLI funding, to develop the next

generation of reusable launch vehicles, rather than to pay for space shuttle

291 std.msfc.nasa.gov/2ndgen/about2ndgen.html. 292 I believe the latter is more likely… assuming the inevitable political backlash to current NASA’s X-33 and International Space Station program development woes is not insurmountable. 293 Grey, Jerry, “The Rocky Road to Space-Launch Heaven,” Aerospace America, November 1996.

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upgrades.295 In a February 2001 letter to Aviation Week & Space Technology,

Rohrabacher notes that SLI’s goals of “commercially competitive, privately owned,

low-cost, safe Earth-to-orbit launch for human spaceflight,” are over-specified, and

that the SLI program’s requirements are “…too narrowly focused on meeting NASA’s

post-shuttle spaceflight needs. Yet the country’s greatest need is to reduce the cost

of launching unmanned spacecraft.”296 Rohrabacher further observes that NASA’s

human spaceflight requirements will likely defeat any potential cost savings derived

from the program. Such an astute assessment is encouraging, especially by such

an influential congressman.

The Space Frontier Foundation has often condemned NASA for not privatizing

the Space Shuttle years ago, for not supporting commercial space transportation,

and for maintaining a monopoly in the Western world in human spaceflight. The

Foundation has also heavily criticized NASA's X-33 program and the Space Launch

Initiative, the latter viewed as "a veiled attempt to create Shuttle II." 297 Like

numerous other industry watch groups, the Space Frontier Foundation believes that

SLI will provide a near-impregnable barrier for entry for new private companies that

are trying to develop new, lower cost RLVs. In essence, they believe SLI will

threaten the existence of innovative launch vehicle entrepreneurs since few firms

could compete with a government sponsored (directly or indirectly subsidized)

program like Shuttle II. This may indeed be true in light of the current financial

markets.

294 These numbers include industry investment as well as NASA’s. 295 Magnuson, Stew, ”House to Hold Hearings on Space Launch Initiative Funding,” Space News, February 14, 2001, www.spacenews.com. 296 Rohrabacher, Dana, “NASA’s Space Launch Initiative Is Off Course,” Aviation Week & Space Technology, February 19, 2001, www.aviationnow.com. 297 Space Frontier Foundation Press Release, "Space Frontier Foundation Says: 'Space Launch Initiative Program (SLIP): Fix it or Kill it'," February 8, 2001, www.space-frontier.org

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The independent Aerospace Safety Advisory Panel (ASAP) assessed the

Shuttle’s current situation in its recent 2001 annual report and made the very somber

conclusion that 298

“…shuttle flight safety could be compromised over the long term

because NASA has been focusing too heavily on commercial or other

optimistic shuttle replacement options, as opposed to longer term

shuttle upgrades.”

The panel reported to NASA that the space agency needs to face reality as well

as the far-reaching implications of its space transportation planning. ASAP’s report

further noted that the current Space Shuttle will likely be the 299

“…primary U.S. manned launch vehicle for another 20 years, to 2020

or so, through the minimal projected life of the International Space

Station. The debates and tradeoffs involved in these issues involve

tens of billions of dollars and will ultimately affect U.S. manned space

operations into the middle of this century.”

Currently, NASA plans to perform about $1.5 billion in shuttle upgrades through

2005, but they are focused on relatively low cost subsystem upgrades rather than

major system design changes such as a new crew escape module or liquid flyback

boosters to replace the solid rocket boosters, for example. ASAP stated their belief

that the 2012 Shuttle phase-out date is restricting consideration of important safety

upgrades that if not implemented may be critical to the long-term safety of both the

space shuttle and the ISS.

At least some ASAP members feel NASA has been too focused on unrealistic

commercial RLV concepts, due largely to overly enthusiastic support for commercial

solutions within Congress, the previous administration and aerospace industry

298 Covault, Craig, “Safety Panel to Goldin: Gear Shuttle Toward 2020,” Aviation Week & Space Technology, Vol.154, No. 8, p. 25, February 19, 2001. 299 Ibid.

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special interest groups. In fact, a recent Aviation Week & Space Technology

article300 quoted an unnamed senior space manager as saying, “Unfortunately the

Clinton Administration and the current NASA administrator put more faith in (RLV)

commercial marketing and viewgraphs than they should have.” Some would argue

the proof for this lies in NASA’s investment in X-33, X-34, NASP, and several

controversial entrepreneurial efforts. My own experiences in leading a number of

independent design and technology maturation assessments of entrepreneurial RLV

concepts since the mid-1990s support the notion that some RLV ventures take

“viewgraph engineering” 301 to a new acme.

ASAP’s conclusions are weighty considering the importance NASA and the

United States government give to the safety of the Space Shuttle system.

Interestingly, these inputs may have been important enough to alter the SLI

schedule; recent interaction with contacts at NASA Marshall Space Flight Center

indicates NASA may be currently examining the option of moving the 2nd generation

RLV initial operational capability date from 2010 to 2020.302 If this were done, it

would require yet another delay in the decision to commit to developing either a new

RLV or a Space Shuttle upgrade. The 1994 National Space Transportation Policy

(NSTC-4) called for “government and private sector decisions by the end of this

decade on development of an operational, next-generation reusable launch

system.”303 Yet NASA’s Chief Engineer Dan Mulville stated in testimony to the

House Subcommittee on Space and Aeronautics, U.S. Congress, in October 1999

that after five years of already studying space transportation architectures NASA

was putting off this decision until 2005.304 An additional five or ten year delay might

not be politically tenable.

300 Ibid. 301 A common engineering management term to say “great form but no content,” or “nice pictures but no substantiating technical analysis,” or even “where’s the beef?” as in the popular Wendy’s restaurant commercial of old. 302 Personal correspondence, April 2001. 303 Mulville, Daniel, Statement of Daniel Mulville, Chief Engineer, Office of the Administrator, NASA, at the “Space Transportation Architecture Studies: The Future of Earth-to-Orbit Spaceflight” hearing to the House Subcommittee on Space and Aeronautics, U.S. Congress, 27 October 1999, www.house.gov/science/ 304 Ibid.

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With Donald Rumsfeld, the new Bush Administration’s Secretary of Defense,

strongly supporting military space research that includes development of an Air

Force spaceplane, industry experts speculate that NASA’s exclusive control of RLV

development will not last.305 Likewise, it appears the Space Launch Initiative will

likely be overhauled after NASA administrator, Daniel Goldin, departs, probably later

this year.306

United States Air Force – Military Spaceplane System

Due to a number of key deficiencies in its current space operational capabilities,

the Air Force Space Command component of the United States Air Force has

documented draft needs for the capability for a militarized RLV system. In response,

the Air Force Research Laboratory in concert with NASA is currently developing

critical technologies for its Military Spaceplane System, a reusable space system

architecture to perform a wide range of missions including launch-on-demand,

reconnaissance, surveillance, satellite orbit transfer, and space defense.

As currently conceived, the Military Spaceplane System includes the Space

Operations Vehicle, a militarized reusable launch vehicle, the Space Maneuver

Vehicle, a reusable upper stage / reusable satellite bus, the Orbital Transfer Vehicle

for on-orbit asset relocation, and the Modular Insertion Stage, a low cost expendable

upper stage. From a user perspective, the Space Operations Vehicle would be

ideally as different from a civil or commercial RLV as an F-111 is from a Boeing 737,

with emphasis on operational characteristics such as mission flexibility, rapid launch,

rapid turn around, and all weather operations, rather than minimum cost launch.

Like its commercial counterpart, however, a critical enabler for the Military

Spaceplane System is affordability. With a target date for initial operations around

2018 – 2020, there is some likelihood that the Space Operations Vehicle will be

305 Sietzen, Frank, Jr, “Spacelift Washington: Commission to Recommend Military Space Boost, New Programs,” January 10, 2001, www.spaceref.com. 306 Sietzen, Frank, Jr, “Spacelift Washington: U.S. Space Launch Policy Facing Uncertain Overhaul,” March 25, 2001, www.spaceref.com.

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derived from a commercial or civil predecessor. Space Operations Vehicle concepts

studied in the past include extensively modified, scaled derivatives of Lockheed

Martin’s X-33 and Boeing’s DC-XA RLV designs.

Space Maneuver Vehicle concepts have also been studied over the past few

years. Under USAF contracts, Boeing designed, fabricated, and tested the X-40A, a

scale model of their Space Maneuver Vehicle concept in 1997 and 1998.307 The

program culminated in a successful autonomous approach and landing flight test by

Boeing and the Air Force in August 1998 at Holloman Air Force Base in New

Mexico.308 The X-40A flight test vehicle is on loan to NASA and is currently being

flight-tested at Dryden Flight Research Center at Edwards, California as part of the

X-37 program.309

While a number of “transatmospheric vehicles”, “aerospaceplanes”, and military

spaceplane concepts have been studied over the years,310 the Air Force has not yet

committed to any one solution, strategically leaving the door open for other system

options, such as a militarized derivative of a commercially developed RLV such as

Lockheed Martin’s VentureStar or interim, partially reusable solutions such as

Boeing’s AirLaunch concept.311

International Reusable Launch Vehicle Concepts

India - AVATAR

India’s Defense Research Development Organization (DRDO) announced in May

1998 that it was working on the design of a small RLV, the AVATAR (Aerobic

307 Karasopoulos, H., et al., “Space Maneuver Vehicle Development by the Mini-Spaceplane Technology Program,” AIAA 98-4149, AIAA Atmospheric Flight Mechanics Conference, Boston, Massachusetts, Aug 98. 308 Baker, Sue, “First Flight: Space Maneuver Vehicle Tries Its Wings,” Leading Edge Magazine, October 1998, p. 17. 309 NASA News Release, “Second Successful Free Flight of X-40A Conducted as Part of NASA’s X-37 Program,” April17, 2001. 310 See for example: Gonzales, Daniel, et al., Proceedings of the RAND Project AIR FORCE Workshop on Transatmospheric Vehicles, RAND Corporation, Santa Monica, California, 1997; and Hart, Don, “A Military Spaceplane – Its Time Has Come,” Aerospace America, May 1997. 311 Wilson, J. R, “AirLaunch on Demand,” Aerospace America, January 2001, p. 43.

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Vehicle for Advanced Trans-Atmospheric Research).312 The AVATAR is supposed

to be the size of a fighter or bomber aircraft, and employ supersonic combustion

ramjets in conjunction with an air liquefaction / oxygen extraction system to carry

payloads from 500 – 1,000 kg (1,100 – 2,200 lb) into LEO. The advanced cycle

engine and the oxygen collection system have reportedly been successfully ground

tested at DDRO and at the Indian Institute of Science.313

Japan – Hope-X, SSTO Spaceplane

In 1987 the National Space Development Agency of Japan (NASDA) began

examining development of a small, reusable upper stage to be lifted with their H-2

ELV.314 The unmanned RLV is called the “H2 Orbiting Plane Experimental” or

Hope-X. Since 1987, NASDA and the National Aerospace Laboratory (NAL) have

accomplished much in their pragmatic, stepping-stone approach towards developing

the Hope-X, executing a series of successful flight test programs over the last

decade. The Orbital Reentry Experiment (OREX) was completed in 1994, and the

Hypersonic Flight Experiment (HYFLEX) and the Automatic Landing Experiment

(ALFLEX) were both completed in 1996. The extensive and successful autonomous

approach and landing flight tests completed under ALFLEX were conducted at

Australia’s Woomera spaceport, a possible site for the eventual operational RLV

system. The flight test series continues with the High Speed Flight Demonstration

(HSFD) planned for 2002, and will culminate in flight tests of the Hope-X using the

H2A ELV beginning in 2004 or later.315

How the program is impacted by the cancellation of the H-2 (Chapter 4) and

development delays on H-2A is unknown. According to a report by The Orbital

Report News Agency, Japan's Science & Technology Agency has decided to put the

312 Associate Administrator for Commercial Space Transportation (AST), 2000 Reusable Launch Vehicle Programs & Concepts – With a Special Section on Spaceports, Federal Aviation Administration, January 2000, www.ast.faa.gov. 313 Ibid. 314 Ibid. 315 Ibid.

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Hope-X program on hold, while considering other launch options.316 I was unable to

confirm this, even with a review of NASDA’s and NAL’s Hope-X program web sites.

According to the Federal Aviation Administration’s report by the Associate

Administrator for Commercial Space Transportation, 2000 Reusable Launch Vehicle

Programs & Concepts – With a Special Section on Spaceports,317 Japan’s long-term

objective is to develop a single-stage-to-orbit (SSTO) RLV. Reminiscent of the

U.S.’s National Aero Space Plane (NASP) program of the late 1980s and early

1990s, NAL is looking at designs for a horizontal takeoff, horizontal landing

spaceplane that would incorporate advanced airbreathing engines, such as

scramjets and liquid air cycle engines, in addition to rockets – either integrated

separately into the airframe or as a combined cycle engine. NAL plans to develop

their SSTO RLV prototype by 2010 and a follow-on, fully operational version by

2020. The Japanese government has modified the HOPE program in order to

streamline the development of the SSTO spaceplane, and a number of Japanese

aerospace companies (Mitsubishi, Ishikawa-Jima-Harima, Kawasaki, Fuji, and

Sumitomo) have been studying advanced propulsion systems.318

Reportedly, Japan and France have discussed collaborative RLV development,

and the possibility exists France’s space agency, CNES, might join in the

program.319

Europe

The Europeans have examined a number of RLV concepts over the past few

decades, such as Sänger and HOTOL, but are not currently engaged in a major RLV

316 Space-Launcher.com, The Orbital Report News Agency, August 2, 2000, www.orbireport.com/News2000-08.html. 317 Associate Administrator for Commercial Space Transportation (AST), 2000 Reusable Launch Vehicle Programs & Concepts – With a Special Section on Spaceports, Federal Aviation Administration, January 2000, www.ast.faa.gov. 318 Ibid. 319 Cáceres, Marco, A, “Many RLVs Still a Distant Dream,” Aviation Week & Space Technology, Vol. 154, No. 3, January 15, 2001, p.148.

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development program. However, recent studies are of interest to the context of this

thesis and are hence discussed briefly.

In the late 1990s, ESA conducted the Future European Space Transportation

Investigation Programme (FESTIP) and initiated the Future Launcher Technology

Programme (FLTP).320 Both programs were devised to determine what the most

promising launch system would be for Europe after the Ariane 5. The primary

interest of these efforts was in reducing launch costs in order to be competitive in

future commercial markets. An impressive array of unmanned reusable launch

vehicle concepts was comprehensively examined under the FESTIP study. Included

in the concepts examined were single- and multi-stage-to-orbit RLV designs, some

powered by rockets, some by advanced airbreathing engines, and some by

combined cycle engines. Also included were ESA-scaled variants of Lockheed

Martin’s X-33 / VentureStar and Boeing’s DC-XA RLV designs, neither of which

made the down-selection for further study.

Among the three preferred designs down-selected for further study was a two-

stage-to-orbit semi-reusable launch vehicle concept formed from the core of the

Ariane 5 booster mated to a liquid fly-back booster.321 Stage separation would occur

at Mach 4.6 after which the liquid fly-back booster component would cruise back to

the launch site under the power of two turbofan engines. This concept would require

little technological push and result in launch cost savings of about 15% less than that

of the current Ariane 5.322 The future? According to industry analyst, Marco

320 Staniszewski, Edgar A, “Semi-Reusable Launch Vehicle - A Next Step For Europe?” AIAA Paper 99-4826, AIAA International Space Planes and Hypersonic Systems and Technologies Conference, 9th, Norfolk, VA, November 1 - 5, 1999. 321 Kuczera, H, and Johnson, C, “The Major Results of the FESTIP System Study,” 9th AIAA International Space Planes and Hypersonic Systems and Technologies Conference, Norfolk, VA, November 1 - 5, 1999. 322 Staniszewski, Edgar A, “Semi-Reusable Launch Vehicle - A Next Step For Europe?” AIAA Paper 99-4826, AIAA International Space Planes and Hypersonic Systems and Technologies Conference, 9th, Norfolk, VA, November 1 - 5, 1999.

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Cáceres, there currently appears not to be a strong European commitment to spend

significant funds on FLTP.323

China

Although information is very sketchy, SpaceDaily reported that China announced

in September 2000 that it intends to begin research and development of a reusable

launch vehicle.324 Initial research “will be in reducing a two-stage launcher to a

single-stage reusable launcher and developing technologies and techniques in

retrieval of portions of the RLV,” according to the article.325

323 Cáceres, Marco, A, “Many RLVs Still a Distant Dream,” Aviation Week & Space Technology, Vol. 154, No. 3, January 15, 2001, p.148. 324 Long, Wei, “China To Develop New Generation of Rockets With View To Moon Landing,” SPACEDAILY, September 19, 2000, www.spacedaily.com/news/china-00zzd.html. 325 Ibid.

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6. Reusable Launch Vehicle Development

This chapter presents an overview of some selected reusable launch vehicle

development issues, focusing on technology development programs and their

strategies. The chapter also examines a few of the other development challenges or

barriers to entry for small, private, entrepreneurial RLV ventures attempting to enter

the space transportation industry marketplace.

Technical Challenges

The technical challenges in developing an affordable and reliable reusable

launch vehicle are enormous, and the effective integration of all of these

technologies into an operationally effective system is at least as challenging. The

technological difficulties stem from a plethora of sources, including the space

environment, launch and reentry environments, and the extreme sensitivity of the

design’s performance to weight growth.

The on-orbit, ascent, and reentry environments are very harsh. The vacuum,

radiation, micrometeorite, and temperature extremes in orbit pose difficult materials

and design challenges. The difference in temperature on the external surfaces of

the Space Shuttle can vary from –250 degrees F. on the shaded side to several

hundred degrees above zero on the side facing the sun. Solar flares and storms can

erupt with little or no warning, and micrometeorites can impact a spacecraft with

relative closing speeds of more than 30,000 feet per second (over 20,000 miles per

hour). Accelerations during launch are very high, as are the acoustical loads

imparted from the rocket engines. Reentry temperatures on an RLV can exceed

over 3,000 degrees F., and even higher temperatures are possible during ascent for

certain airbreathing concepts. At the same time, cryogenic propellants such as

liquid hydrogen and liquid oxygen require tanks, propellant lines, valves, seals, and

other hardware that can handle temperatures as low as -420 and -285 degrees F,

respectively.

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RLVs have a natural hurdle to overcome in order to attain orbit – reach a

minimum final speed of more than 25,500 feet per second.326 Unlike the case of

their aircraft cousins, the performance of a reusable launch vehicle is a highly

nonlinear function of its design. A few percent of growth in dry weight of a typical

aircraft, for example, may translate to roughly a linear decrease in range of a few

percent. In contrast, dry weight327 growth of a typical RLV design of a mere few

percent may translate to a failed design that cannot achieve orbit. Thus, the weight

growth of the RLV during development, an inevitable occurrence, must be very

carefully managed. One pound of additional weight added to an RLV’s structure due

to an unforeseen technical problem or integration requirement can translate to 20 to

40 pounds of required additional weight for the overall RLV. Part of this additional

weight is the increased propellant required to achieve the minimum orbital velocity

due to the extra structural weight. Another part is due to the additional tankage

required to hold that propellant, the additional thermal protection system and

structure required to contain the tankage, and additional iterations of this reinforcing

loop (e.g. the additional weight added to the RLV in order to hold the extra propellant

must itself be propelled to orbital speeds, thus requiring additional propellant and

propellant related weight). Thus, small increases in dry weight have a large, ripple-

down affect on the overall design of the RLV, making the integration process very

important and the overall development very difficult, especially with the general very

high level of risk of the employed technologies.

RLV Dominant Design

The difficulty in RLV design has spawned a general lack of consensus among

industry experts and design engineers on not only what the optimal design of an

RLV should be, but also its overriding system architecture. The dominant RLV

design has yet to be established, and rocket engineers and program managers

fiercely dispute which technologies should be the focus of their limited resources, in

essence, arguing over which technologies (some disruptive, some not) will win the

326 This value varies somewhat with the type of orbit.

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day. This situation is analogous to early twentieth century competition to establish

the dominant design of the automobile from a spectrum of candidates powered by

various means including electric motors, steam engines, and internal combustion

engines. For the RLV case, some technologists believe that only advanced

airbreathing engines such as supersonic combustion ramjets, combined cycles, or

liquid air cycle engines potentially offer a disruptive enough increase in propulsion

system performance to be worth the investment. Others point to the billions of

dollars invested in this area with little to show as well as the intensive additional

design complexity it requires and thus instead favor a more incremental,

evolutionary technology approach to developing RLVs. The latter viewpoint notes

that the overall objective is not to pour billions of dollars into maturing the latest set

of trendy, flashy, disruptive technologies to somehow integrate into a new RLV

design but rather to provide a disruptive increase in the performance of the entire

RLV system.328

Teece329 notes the importance of selecting the right design in the

“preparadigmatic stages,” and gives the early history of the automobile industry and

De Havilland’s Comet I as exemplifications. Although significant innovation exists in

many architectural features of current RLV entrepreneurial designs (staging Mach

number and altitude, number of stages, engine selection, etc.) it is yet unclear which

of these designs are viable enough to take to a preparadigmatic stage, where

products are actually built and compete with one another over market share of lead

users. Kistler appears to be close but many of the others are far from this point.

Teece theorizes that the best strategy is to let the basic design “float” until sufficient

evidence accrues supporting that design will become the industry standard. This

may be an unaffordable luxury in an industry like space transportation where the

investment is measured in billions of dollars and product development times can

327 Dry weight is essentially the weight of the vehicle in orbit, after the vast bulk of its propellant it has been consumed during ascent. 328 More on this debate in a later section. 329 Teece, David J., “Profiting from technological innovation: Implications for integration, collaboration, licensing, and public policy,” Research Policy, No. 15, 1986, pp. 285-305.

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take 5 to 10 years. Indeed, with only a single 1st generation RLV in existence the

current stage is probably more accurately deemed a “pre-preparadigmatic” stage.

Since the total number of RLVs produced is likely to be small, the space

transportation market is effectively a niche market with perhaps less than a dozen

RLVs sufficient to meet worldwide low Earth orbit launch demand for some time.

With this in mind, the first successful RLV stands a good chance of being the de

facto dominant design (here, a “successful” RLV is one which meets NASA’s Space

Launch Initiative 2nd Generation RLV program cost goal of $1,000 per lb to LEO and

reliability goal of 0.9999, respectively). With such lengthy development times, large

required investment, and other barriers to entry, the first successful RLV fleet may

tip the commercial market toward a “winner take all” situation. Although many

commercial launch systems would be driven out of business, some of those

subsidized by their governments would likely survive due to nationalistic and

strategic considerations, including the reluctance of customers to rely on a sole

source launch provider. An accident or design flaw, for example, could ground the

entire RLV fleet as occurred with the Space Shuttle in the mid-1980s.

RLV Technology Development Programs

The development of critical technologies for reusable launch vehicles has been

carried out for over 40 years at various levels of intensity. One could fill hundreds of

pages describing the many current and past projects and programs in this area. For

brevity, I consider only some of the most important and more recent RLV technology

development and demonstration programs below.

NASP, X-30

The full story of the controversial, highly classified National Aero-Space Plane

(NASP) program would certainly be fascinating, and might possibly be told with a

contrasting mix of engineering excellence and incompetence, political influence and

bureaucratic posturing, wasted funding and splendid technical achievement. When

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the dust settled after the program was cancelled in 1994, NASA and the Air Force

had spent somewhere around $3.0 billion.330

The NASP program had its roots in the highly classified Copper Canyon project

of 1982 to 1985 by the Defense Advanced Research Projects Agency (DARPA).331

This study examined the feasibility of horizontal takeoff and landing single-stage-to-

orbit reusable launch vehicles, and prompted the NASP program which was

intended to develop the technologies for an RLV and a sustained hypersonic cruise

vehicle, both powered by an advanced airbreathing propulsion system.

In his February 1986 State of the Union Address, President Ronald Reagan

introduced the NASP program as enabling an exciting new hypersonic aircraft,

“…a new Orient Express that could, by the end of the next decade,

take off from Dulles Airport and accelerate up to twenty-five times the

speed of sound, attaining low Earth orbit or flying to Tokyo within two

hours…“

Jointly run by NASA and the Air Force, the NASP program began in 1986 to

mature the technologies leading to a manned experimental aircraft designated the X-

30. The concept exploration phase pointed to vast military, civil, and commercial

utility of the hypersonic cruiser and RLV concepts, for example, claiming a large

reduction in space launch costs as well as a dramatic reduction in transit time for

long-range (atmospheric) flights. Proponents argued that NASP would replace the

Space Shuttle, with 24 hour turn-around times and billions of dollars of costs saving

to the U.S. due to launch costs of about two orders of magnitude lower than the

Shuttle’s. The program was co-managed and funded by NASA and USAF. The

330 Although the estimates in the literature vary considerably, estimates from two program insiders I spoke with were around $2.5 to $3 billion including both contractor and government investments. One literature reference indicating more than $3 billion is: Sponable, Jess M, “It’s The Operations, Stupid! Not More Technology,” editorial letter in Aviation Week & Space Technology, originally published May 24, 1999, www.aviationnow.com. 331 Pike, John, “X-30 National Aerospace Plane (NASP),” FAS Intelligence Resource Program, Mystery Aircraft, www.fas.org/irp/mystery/naps.htm.

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development price for the National Aero-Space Plane was originally estimated to be

a mere $3.1 billion over 8 years.332

NASP program technology focus was on the rocket-based combined cycle

ramjet/scramjet propulsion system required by the various NASP concepts, as well

as the extensive materials and structures advancements required to withstand the

enormous heat loads associated with sustained, high hypersonic atmospheric flight.

While significant technological progress was made, the technical difficulty of the

project was vastly underestimated and consequently later estimates of program cost

and schedule dramatically increased - some reports estimated the program was 11

years behind schedule and 500% over-budget.333 Congress cancelled the National

Aero-Space Plane program in 1994 due to cost increases and technology

problems.334

Figure 5 NASP X-30 Concept (Sketch compliments of NASA)

Many of the exaggerations by NASP proponents of the ease and costs to mature

critical NASP technologies, and of the performance and operability advantages of

the advanced airbreathing propulsion systems were not difficult to discern by

experienced RLV designers in the early days of the program. Eventually, designers

were forced to incorporate conventional rockets into some of the X-30 designs in

332 Ibid. 333 Ibid 334 www.dfrc.nasa.gov/History/x-planes.html.

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order to augment the extremely complex airbreathing engines and provide the

needed thrust to boost the vehicle outside the sensible atmosphere. Yet even with

this coupled with a number of other integration-related design modifications that

severely reduced NASP launch flight performance, proponents still claimed the

design to be a success.335 It is astonishing that the NASP program continued for as

long as it did in the face of the criticisms it received from sources both internal and

external to the Air Force and NASA.

In 1987 the Air Force tasked RAND336 to evaluate the status of the program and

the results were not encouraging. Despite several years of intensive research (by

the time the review was conducted) RAND found that many critical technology

development issues were unresolved, particularly in the realms of computational

fluid dynamics and the airbreathing combined cycle propulsion system.337 The

Defense Science Board (DSB) Task Force also reviewed the NASP program in

1988. The DSB found that the program had unrealistic development schedules for

every one of the concept’s six critical technology areas: aerodynamics, supersonic

mixing and fuel-air combustion, high-temperature materials, actively cooled

structures, control systems, and computational fluid dynamics.338 Interestingly, both

RAND and DSB concluded that the latter technology was inadequate as the primary

NASP design tool and would be for a decade or more. These and other program

assessments also pointed to the very high levels of uncertainty associated with the

flows through engine inlets and combustion chambers including turbulent flow

transitions and engine mode transitions, and materials problems associated with

cryogenic hydrogen used in active cooling of various vehicle components and

structures heated to very high temperatures. The program ground on, however, with

335 Curiously, many airbreathing advocates implicitly assume that merely incorporating an airbreathing engine, no matter how complex, into an RLV will automatically give the launch vehicle aircraft-like operations, so highly desired. Evidence for this has been sorely lacking. 336 RAND is a non-profit organization located in Santa Monica, California that conducts research and analysis for public policy issues. 337 Gonzales, Daniel, et al., Proceedings of the RAND Project AIR FORCE Workshop on Transatmospheric Vehicles, RAND Corporation, Santa Monica, California, 1997. 338 Ibid.

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most of these problems unsolved, even after burning through several billions of

dollars.

Regardless of this, the NASP program succeeded in some important technology

efforts. According to a NASA historical note on the program,339

“The program developed significant advances in high-temperature,

carbon-carbon materials, lightweight titanium and beryllium alloys, and

high strength, corrosion-resistant titanium-alloy composites. These

technologies and the program's work with supersonic-combustion

ramjet propulsion will all be useful to subsequent U.S. aerospace

efforts in the hypersonic area.”

NASP-derivative technology programs still exist today, and can be seen in the

NASA Hyper-X X-43A program (below), AFRL’s HyTech hydrocarbon scramjet

engine program, and numerous other projects.

DC-X, DC-XA

The Ballistic Missile Defense Organization's Single Stage Rocket Technology

(SSRT) program was chartered to demonstrate aircraft-like operations for a reusable

single stage rocket. As part of the SSRT program, BMDO built an experimental

suborbital launch vehicle, officially designated the SX-1 (Spaceplane Experimental),

and later known as the DC-X (Delta Clipper-Experimental). The vehicle was flight-

tested at White Sands Missile Range in New Mexico in the mid-1990s.340

The DC-X was designed to take off vertically, fly a pre-programmed maneuver,

and return and land vertically. Its purpose was to test simplified, low cost ground

and flight operations, vehicle maintainability, operability, reliability, supportability,

and rapid turnaround, all characteristics relevant to future RLVs. Rather than a

standing army of operations personnel, for example, the DC-X’s highly automated

339 www.dfrc.nasa.gov/History/x-planes.html. 340 www.hq.nasa.gov/office/pao/history/x-33/dc-xa.htm.

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control center system was manned by only three people: two for flight operations

and one for ground operations and servicing. The Delta Clipper Experimental was

also intended to be a one-third-scale model of McDonnell Douglas’s proposed

single-stage-to-orbit RLV.

Figure 6 BMDO - McDonnell Douglas DC-X Launch

(Sketch compliments of NASA)

The Delta Clipper Experimental was constructed in 1991 - 1993 by McDonnell

Douglas (now Boeing) at their Huntington Beach facility. The DC-X had a conical

shape measuring 40 feet high and 13 1/3 feet at base. It was powered by four liquid

oxygen / liquid hydrogen RL-l0A5 rocket engines, each throttleable from 30% to

l00%. The vehicle weighed 20,000 lb dry, and 41,600 lb with a full propellant

load.341 The DC-X first flew in August 1993 (Figure 6) and successfully completed

eight flights before being returned to Huntington Beach for conversion into the DC-

XA. Lt Col Jess Sponable of the Air Force’s Phillips Laboratory served as the

program manager.

The Delta Clipper Graham Experimental Advanced, or DC-XA (later renamed the

Clipper Graham) was a modified version of the DC-X, incorporating a number of

advanced technologies required for later orbit capable derivatives. Modifications

341 Ibid.

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included a lightweight graphite-epoxy liquid hydrogen tank and an advanced

graphite / aluminum honeycomb intertank built by McDonnell Douglas, an aluminum-

lithium liquid oxygen tank built by Energia, and an improved reaction control system

from Aerojet.342 The DC-XA was operated by NASA and the Air Force, and was

tested at White Sands during the summer of 1996. The DC-XA demonstrated a 26-

hour turnaround between its second and third flights, a first for any rocket, but was

destroyed by fire due to a collapsed landing gear at the end of its fourth flight, ending

the program. An investigation board later determined the cause of the accident was

an unconnected helium pressurant line that supplied hydraulic pressure to extend

the landing strut.343

X-33

The purpose of NASA’s X-33 program was to prove the technological feasibility

of a single-stage-to-orbit reusable launch vehicle. When first begun, the X-33

program was according to NASA the “centerpiece of a NASA 5-year plan aimed at

generating the data needed to support a national policy decision on RLV

development by the year 2000.” This decision was dictated to NASA by law under

the 1994 National Space Transportation Policy (NSTC-4),344 under the Space

Launch initiative Program (Chapter 5). NASA planned to build and test a series of

“Trailblazer” and “Pathfinder” flying technology testbeds to serve as proofs of

concept for follow-on medium or heavy-lift RLVs. The Trailblazer RLV technology

programs, of which the X-33 was the first, would be focused on large, integrating

RLV concepts costing on the order of a billion dollars. The Pathfinders (e.g. X-34)

would be flight test programs based on smaller, more limited concepts. NASA

planned to initiate new Pathfinder and Trailblazer programs every few years, leading

eventually to the development of operational first and second generation RLVs.

342 www.hq.nasa.gov/office/pao/history/x-33/dc-xa.htm. 343 Ibid. 344 Mulville, Daniel, Statement of Daniel Mulville, Chief Engineer, Office of the Administrator, NASA, at the “Space Transportation Architecture Studies: The Future of Earth-to-Orbit Spaceflight” hearing to the House Subcommittee on Space and Aeronautics, U.S. Congress, 27 October 1999, www.house.gov/science/.

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Figure 7 NASA - Lockheed Martin X-33 Concept

(Sketch compliments of NASA)

After a controversial selection of the winning contractor from a bidder pool that

also included Rockwell International and McDonnell Douglas, NASA awarded the X-

33 contract to Lockheed Martin on July 1996. Under the terms of the cooperative

agreement and cost-sharing arrangement, Lockheed planned to invest $212 million

of its own funds in the X-33 program, while NASA budgeted $837 million for

Lockheed and $104 in internal funds for NASA’s own program work.345 The overall

program cost was thus originally estimated to be $1.14 billion. The first flight of the

X-33 was scheduled for March 1999 to allow NASA and the U.S. government time to

abide to NSTC-4.

Lockheed Martin’s interest in the X-33 (Figure 7) was fundamentally to reduce

development risk for a commercially developed and operated single-stage-to-orbit

RLV, called VentureStar (Chapter 5), by proving critical technologies and design

principles. The X-33 was intended to be an approximate half-scale, suborbital

prototype of the orbital VentureStar. Like the X-33, the VentureStar was to be

345 Gonzales, Daniel, et al., Proceedings of the RAND Project AIR FORCE Workshop on Transatmospheric Vehicles, RAND Corporation, Santa Monica, California, 1997.

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uninhabited, take-off vertically, and land horizontally. Among the technologies

NASA and Lockheed had intended to demonstrate with the X-33 program are:

• Linear aerospike liquid oxygen / liquid hydrogen engine

• Composite liquid hydrogen propellant tanks

• Thermal protection system concepts including advanced flexible reusable

blankets, durable metallic systems, integrated standoff systems, and carbon /

carbon leading edges

• Lifting body aerodynamics and performance

• Hot control surface structure

• Composite thrust structure

• Integrated vehicle health management systems

• Autonomous vehicle operations

In addition to these and other technologies, the X-33 program aimed to

demonstrate a number of ground operational processes of significant improvement

over current Shuttle operations. Included in these demonstrations were plans to

attempt a two-day turnaround of the X-33.346, 347

The X-33 program had a number of technical difficulties that ate up funds and

schedule. Development of the linear aerospike rocket engine took longer than

expected, pushing the first flight test back by about six months. In parallel work on a

derivative of this engine for the VentureStar, difficulties also surfaced in the design of

the engine expansion ramps, which would be subjected to intense thermal and

acoustic loads. Although a number of smaller problems contributed to cost and

schedule overruns, the biggest technical problem for the X-33 program was the

failure (catastrophic de-lamination) of one of the graphite composite liquid hydrogen

tanks during ground testing. Originally blamed on a manufacturing error, a review

found the tank’s design to be faulty. Program managers estimated an additional $55

million would have been required by the program in order to design and fabricate

346 Wilson, J. R, “X-33 and RLV Take Parallel Paths,” Aerospace America, February 1999, p. 38.

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two aluminum replacement tanks. Accompanying the increased costs, the vehicle’s

weight would have risen, significantly degrading the X-33’s flight performance.348

The X-33 program was dumped by NASA in March 2001 due to extensive cost

overruns after an expenditure of $912 million by NASA and $356 million by

Lockheed Martin, the latter about $145 million more than planned.349 The X-33 was

to have flown 15 high-Mach suborbital flights by 2000. Instead, when the program

was cancelled the flight test vehicle was only about 90% complete and the earliest

advertised flight test date was 2003.350 Even more telling, however, was the

dramatic drop in the flight test vehicle’s estimated performance, rumored to have

dropped from a maximum flight speed goal earlier in the program of about Mach 15

to Mach 10 or 11 or even lower, raising concerns that the vehicle could even meet

its minimum ranges imposed by the launch facility at Edwards Air Force Base in

California and the landing facilities at Michael Army Air Field at Dugway Proving

Ground, Utah and Malstrom Air Force Base, Montana.

Lockheed’s X-33 concept was generally thought to be far more risky and much

more complicated than Rockwell’s or McDonnell Douglas’s concepts. Many RLV

designers were surprised at NASA’s selection of this concept over the others. Some

attributed it to NASA’s apparent tendency to select revolutionary rather than

evolutionary concepts to develop. Others attribute NASA’s decision to two

determinants based on political and psychological reasoning: first, that a Rockwell

design could not be selected since Rockwell built the expensive Space Shuttle

system and the focus of X-33 was on order of magnitude launch cost reduction; and

second that the McDonnell Douglas DC-X design was too risky as demonstrated by

the landing gear failure of the DC-XA. If true, the latter argument is especially ironic

347 Although they received relatively little notice, some of the planned ground operations demonstrations could have been invaluable for future RLV development. 348 From: Cabbage, Michael, “Liftoff In Doubt for Heir to Shuttle,” The Orlando Sentinel, August 20, 2000; and Cabbage, Michael, “NASA Shells Out $68 Million to Bail Out X-33 Space Plane,” The Orlando Sentinel, September 30, 2000. 349 Hoversten, Paul, “Citing Costs, NASA Kills Futuristic X-33, X-34,” Aviation Week and Space Technology, www.AviationNow.com, 1 March 2001. 350 Ibid.

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since the Europeans found from their Future European Space Transportation

Investigation Programme (FESTIP) that the probability of catastrophic loss of their

FSSC-3 concept (a vertical-vertical, single-stage-to-orbit RLV concept derived from

the DC-XA), was approximately only one third that of their FSSC-5 RLV concept (a

derivative of the X-33).351 An alternative hypothesis is that NASA’s down-selection

decision depended on which company most effectively convinced NASA it would

pursue financing and developing a follow-on, operational reusable launch vehicle.352

Regardless of the real reason, NASA gambled on the riskiest approach and lost.

X-34

NASA’s X-34 program has the unsavory distinction of being one of the few

programs ever cancelled twice.353 The original X-34 program was awarded in the

mid-1990s to the industry team of Rockwell International and Orbital Sciences

Corporation. The original program goals were to develop a suborbital, air-launched

RLV testbed capable of reaching a speed between Mach 12 to 14 at about 100 miles

altitude. NASA’s hope was for the technology demonstration program to enable a

follow-on commercial system that would deploy an upper stage at apogee to orbit

payloads. However, the original, $60 million, ill-fated X-34 program was abandoned

due to program cost growth and disagreements between Rockwell and Orbital over

which rocket engine to use, the Russian RD-120 or Rocketdyne’s RS-27.354

After the cancellation of the first X-34 program, NASA competitively awarded the

new and improved X-34 program to Orbital Sciences in 1996. This $85.7 million

contract was for X-34 design, development, and flight tests. Three test vehicles

were to be built, one for ground tests and un-powered flight tests and two for

powered flight tests. The new X-34 program’s goal was to provide a much more

351 González, P., “Influence of the Abort Capability in Reusable Systems Reliability – FESTIP Results Overview,” AIAA Paper 1999-4928, 9th AIAA International Space Planes and Hypersonic Systems and Technologies Conference, Norfolk, VA, November 1 - 5, 1999. 352 Grey, Jerry, “The Rocky Road to Space-Launch Heaven,” Aerospace America, November 1996. 353 By some accounts the X-34 program was instead abandoned once by the contractors and cancelled once by NASA. 354 Gonzales, Daniel, et al., Proceedings of the RAND Project AIR FORCE Workshop on Transatmospheric Vehicles, RAND Corporation, Santa Monica, California, 1997.

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modest suborbital, air-launched RLV testbed, with a maximum speed of only Mach

8. The X-34 (Figure 8) was to demonstrate new, efficient vehicle processing and

launch operations, evaluate performance of advanced RLV technologies, and host

alternative RLV technology experiments in “realistic”355 RLV environments. The

technologies that were intended to be demonstrated include:

• Reusable Liquid Oxygen / Kerosene Rocket Engine

• Thermal Protection System Concepts

• Advanced Carbon Silicon Carbide Hot Structures

• Titanium Aluminide Structure

• Encapsulated Carbon Matrix Composite Materials

• Mechanically Attached Composite Structure and Skin

• Electric Actuation

• Rapid Turn-Around Capability (24 Hour Goal)

• Autonomous Flight Operations Through Adverse Weather (Rain and Fog)

• Integrated Structural Health Monitoring System for Kerosene Tank.

Figure 8 NASA - Orbital Science X-34 (Photograph compliments of NASA)

355 “Realistic” is debatable here since the flight environment at Mach 8 is far, far less demanding than reentry flight at triple these speeds.

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An August 2000 SpaceRef.com article reported delays up to two years and

extensive cost overruns.356 At this point powered flight tests, originally scheduled for

1999, were being slipped until at least 2002 assuming costs could be contained.

The article also mentioned that NASA was considering dropping the number of flight

tests from 27 to half a dozen or so, as well as reducing the X-34’s maximum flight

test speed from Mach 8 to 2.5.357

The X-34 program was cancelled in March 2001 due to extensive cost overruns

after an expenditure of $205 million by NASA.358 NASA and Orbital Sciences

Corporation laid much of the blame for the failure of the program on each other.

Orbital claimed that NASA made unnecessary design changes and intruded and

interfered with Orbital’s work, particularly after two 1999 well-publicized Mars probe

failures when the agency began revamping their “better-faster-cheaper”

philosophy.359 Another major problem cited by the contractor was the liquid oxygen /

kerosene Fastrac rocket engine, under development by NASA in-house at NASA

Marshall Space Flight Center. Like the Rotary Rocket Company, Orbital Sciences’

X-34 program also ironically depended on NASA to develop this critical system in

order to reduce development time and technical risk. However, NASA’s Fastrac

engine program ran into difficulties and had not yet produced an engine for the

waiting X-34 flight test vehicles as of contract cancellation.360 NASA, on the other

hand, claimed that the program was cancelled due to spiraling costs, not their

Fastrac engine, and that the investigations of the Mars probe failures had impacted

the X-34 program by pointing out that redundant systems were needed in even

unmanned vehicles.361

356 Cowing, Keith, “Two Year Delay in X-34 Flight Testing Being Considered by NASA, ”August 24, 2000, www.spaceref.com. 357 Ibid. The value of a Mach 8 demonstrator for proving out technologies designed to withstand much higher speed flight was already suspect. A maximum speed of Mach 2.5 was ludicrous. 358 Hoversten, Paul, “Citing Costs, NASA Kills Futuristic X-33, X-34,” Aviation Week and Space Technology, www.AviationNow.com, 1 March 2001. 359 Spires, Shelby G., “Builder of X-34 Faults NASA,” The Huntsville Times, March 8, 2001. 360 After completing development of the engine in 1999, NASA contracted Summa Technology to manufacture three Fastrac engines for the X-34 program according to: Associate Administrator for Commercial Space Transportation (AST), Reusable Launch Vehicles & Spaceports: Programs & Concepts for 2001, Federal Aviation Administration, January 2001, www.ast.faa.gov. 361 Spires, Shelby G., “Builder of X-34 Faults NASA,” The Huntsville Times, March 8, 2001.

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X-37

NASA’s X-37 program is another reusable launch vehicle technology testbed, but

it differs significantly from the X-33 and X-34 concepts in a very important facet – the

X-37 will be designed and demonstrated in both the atmosphere and in space, thus

testing RLV components throughout their entire flight envelope. The X-37 is hence

designed for flight ranging from low speed autonomous approach and landing on a

conventional airport runway to Earth atmospheric reentry at speeds exceeding Mach

25. In contrast, the X-33 and X-34 were designed for maximum flight speeds of

Mach 15 and Mach 8, respectively.

Figure 9 USAF - Boeing X-40A Space Maneuver Vehicle

(Photograph compliments of NASA)

In July 1999, NASA awarded The Boeing Company of Seal Beach, California a

four-year cooperative agreement to develop the X-37. The total value of the

cooperative agreement is about $173 million, and the agreement calls for an

approximately equal sharing of development costs between Boeing and the U.S.

government.362 The main contributor for the latter is NASA; the Air Force, however,

is contributing about $16 million as well as the use of the X-40A flight test vehicle

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(from the Military Spaceplane Program discussed earlier) to the program in order for

the X-37 to demonstrate certain technologies of interest to the military.

The X-37 is about 27.5 feet long, has a wingspan of about 15 feet, and weighs in

the neighborhood of 12,000 pounds.363 The X-37 is a reusable upper stage /

reusable satellite bus concept that was originally designed to be part of an overall

reusable launch vehicle system. The X-37 is a 120 percent scale derivative of the

Air Force’s X-40A, which itself was derived from Boeing’s Space Maneuver Vehicle

concept (part of the Air Force’s Military Spaceplane System). The unpowered X-40A

was designed and built by Boeing under Air Force Research Laboratory contracts in

1996 - 1997, and extensively ground-tested at Holloman Air Force Base, New

Mexico. The initial phase of the USAF X-40A program culminated in a successful

autonomous approach and landing flight in August 1998.364 The Air Force’s follow-

on X-40A flight test phase was overtaken by NASA’s X-37 program, in which many

additional approach and landing flight tests of the X-40A are currently being

conducted by NASA at Edwards Air Force Base, California to reduce X-37 risk

(Figure 9).365

The X-37 is powered by the venerable AR-2/3 hydrogen peroxide / kerosene

rocket engine, and it is designed to be able to maneuver and remain in orbit for up to

three weeks. Initial program plans were for the Space Shuttle to carry the X-37 into

orbit where the flight test vehicle would be released, conduct an orbital maneuvering

flight test, reenter the Earth’s atmosphere, and land autonomously. Two orbital flight

tests were scheduled in Shuttle launches in 2002 and 2003 at no cost to the

program.

362 David, Leonard, “X-37: An Orbital Test Bed,” Aerospace America, June 2000, p. 39. 363 NASA Marshall Space Flight Center X-37 Fact Sheet, www.msfc.nasa.gov/news/background/facts/x37.htm. 364 Karasopoulos, H., et al., “Space Maneuver Vehicle Development by the Mini-Spaceplane Technology Program,” AIAA 98-4149, AIAA Atmospheric Flight Mechanics Conference, Boston, Massachusetts, August 1998. 365 Davis, Brett, “X-40A Components Tested in Gliding Flight,” Aerospace Daily, March 14, 2001.

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Figure 10 1998 X-40A Space Maneuver Vehicle Flight

Test at White Sands Missile Range, NM (Photograph compliments of AFRL)

A multitude of RLV flight experiments and advanced technology demonstrations

will be carried by the X-37 including the following:

• Sub-Surface/Flush High Data Rate Antenna

• Fiber Optic Data Bus System

• Fault Tolerant, Autonomous Operations

• Small Crew Flight Operations Control Center

• All Weather, Windward Adaptive Guidance

• Rapid Mission Data Loading

• Auto Rendezvous - Close Approach

• High Temperature Electronics

• High Energy Density Batteries

• Integrated Vehicle Health Monitoring

• Rapid-Global Thermal Protection System Damage Detection

• Calculated Air Data System

• High Temperature Graphite Beryllium Matrix Sandwich Structure

• Standard Payload Interfaces

• Non-Toxic, Storable Propellant Reaction Control System

• Composite Propellant Feed Lines & Values

• Conformal Reusable Insulation (Windward)

• Durable, Unitized Ceramic Leading Edge Tiles

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• High Temp, Low Cost Joints & Seals

• Loop Heat Pipe Thermal Control System

• Durable Advanced Flexible Reusable Surface Insulation

• Highly Operable Metallic Thermal Protection System

The future of the promising X-37 program appears to be currently uncertain.

Sources inside the program point to internal NASA squabbling on which NASA

center will have to fund the promised Shuttle rides as a major factor in a schedule

delay… and a potential showstopper for the overall program. Reportedly, ELV

launch options are being examined in case the promised Shuttle launches are

withdrawn. Other sources mention potential Shuttle safety concerns with carrying

the X-37 in the payload bay. Still other reports note that the X-37 and NASA’s use of

the Air Force / Boeing X-40A could be dropped as soon as April 2001 if the program

doesn’t succeed in competition for NASA’s own Space Launch Initiative funding.366

It is reported that the program has spent $132 million as of March 2001.367

Hyper-X, X-43A

The Hyper-X X-43A is a hypersonic flight test vehicle program with the goal of

validating designs of an airframe-integrated, airbreathing hypersonic propulsion

system. The propulsion system to be tested on the X-43A is a hydrogen-fueled

supersonic combustion ramjet, or scramjet, which is a possible future engine for 3rd

generation RLV concepts.368 The Hyper-X program appears to be wisely testing a

number of hypersonic propulsion related technologies that were developed under

the NASP program at significant expense but were never tested.

Each of the three un-piloted Hyper-X research vehicles is 12 feet long and is

manufactured by Micro Craft Inc. of Tullahoma, Tennessee. Micro Craft is also

providing overall program management for the industry team that includes Boeing

North American of Seal Beach, California, GASL Inc. of Ronkonkoma, New York,

366 Hoversten, Paul, “Budget Concerns Could Shrink X-Fleet Further,” Aviation Week and Space Technology, www.AviationNow.com, 2 March 2001. 367 Ibid. 368 NASA currently estimates the development of a 3rd generation RLV around the year 2025.

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and Accurate Automation of Chattanooga, Tennessee. Boeing is conducting vehicle

aerodynamic, thermal, and structural design analysis, GASL is designing and

fabricating the scramjet engine and fuel system, and Accurate Automation is

handling the instrumentation.369

Figure 11 NASA – Micro Craft X-43A

(Artist sketch compliments of NASA)

The X-43A vehicles (Figure 11) will be mated to Orbital Science Pegasus rocket

boosters that will accelerate the flight test vehicles up to Mach 7 and Mach 10 test

conditions after air-launch from Dryden’s B-52 research airplane. The program

plans to conduct three flight tests within the Western Test Range off the coast of

southern California, two at Mach 7, and one at Mach 10. The flight test vehicles are

unrecoverable and will conduct aerodynamic and propulsion experiments before

crashing into the Pacific Ocean. The first flight test is scheduled for this year.

Initiated in March 1997, the Hyper-X program had originally scheduled its first

flight test for early fiscal year 1999. The X-43A program had spent $183 million as

of March 2001 without a test flight to date.370 Curiously, the original contract funding

could not be located even with an intensive search on NASA’s official X-43 web

369 Freeman, Delma C, et al., “The NASA Hyper-X Program,” 48th International Astronautical Congress, Turin, Italy, October 6-10, 1997. 370 Hoversten, Paul, “Budget Concerns Could Shrink X-Fleet Further,” Aviation Week and Space Technology, www.AviationNow.com, 2 March 2001.

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pages, numerous other Internet sites, the media, and even a number of program

overview papers.371, 372

Space Operations Vehicle Technology Program

While currently at much lower funding levels than NASA, the Air Force Research

Laboratory is conducting significant research in reusable launch vehicle technology

development under the Space Operations Vehicle Technology Program, at Wright-

Patterson Air Force Base, Ohio. Due to the 1994 Clinton Administration order that

NASA would lead government RLV development, the Air Force’s RLV technology

maturation effort is focused primarily on either critical technologies not being

addressed by the NASA program or RLV technologies that are military-unique.

AFRL’s effort is closely coordinated with NASA’s second generation RLV program

and the two organizations are working collaboratively on several RLV technology

programs, such as the X-37. Space Operations Vehicle concepts appear in Figure

12 and Figure 13.

Figure 12 Lockheed Martin – USAF Space Operations Vehicle

& Modular Insertion Stage Concepts (Artist sketch compliments of AFRL)

371 Freeman, Delma C, et al., “The NASA Hyper-X Program,” 48th International Astronautical Congress, Turin, Italy, October 6-10, 1997 372 Micro Craft’s website (http://www.microcraft.com/IO_hyperX.htm) indicates their contract was worth $33.4 million over 55 months to build 4 vehicles, with the first flight scheduled for early fiscal year 1999.

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In the area of reusable propulsion, AFRL has research programs on advanced

liquid hydrogen / liquid oxygen rocket engine components such as turbopumps, pre-

burners, hydrostatic bearings, light weight thrust chambers, and light weight

cryogenic lines and ducts.373 AFRL is also conducting research in military RLV

designs, hot primary and control surfaces, out-of-autoclave composite processing,

advanced thermal protection systems and non-destructive inspection of them,

photonic vehicle management systems, electric actuation, and advanced energy

storage techniques.374

In addition to these programs, AFRL is conducting research related to other

reusable elements of the Military Spaceplane System, including the Space

Maneuver Vehicle and the Orbital Transfer Vehicle.

Figure 13 Boeing – USAF Space Operations Vehicle & Space Maneuver Vehicle Concepts

(Artist sketch compliments of AFRL)

373 Karasopoulos, Harry, and Gillard, William, “Space Operations Vehicle (SOV) Technology Program,” Military Spaceplane ITTP Review, Kirtland Air Force Base, New Mexico, 21 March 2000. 374 Ibid.

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Technology Development Observations

This section presents some observations of technology strategies, issues, and

trends garnered from the ELV and RLV development programs discussed in

Chapters 4 and 5 as well as the RLV technology demonstration programs presented

in this chapter. The observations are unapologetically colored somewhat by my own

prior engineering and management experiences in RLV technology development

and assessments of entrepreneurial RLV designs and technology maturity.

Entrepreneurial Launch Vehicle Development is Very Challenging

Entrepreneurial reusable launch vehicle development poses an extremely risky

and difficult challenge. There have been a number of failed entrepreneurial launch

vehicle development ventures in the past (Figure 14), and to date no entrepreneurial

ELV or RLV venture has succeeded. Government and corporate programs have

faired no better. NASA cancelled their X-33 and X-34 programs just a few weeks

ago at a cost of $1.5 billion due to technological problems and excessive cost and

schedule growth. Further, the entire current crop of entrepreneurial RLV developers

appears to be foundering, at least with respect to acquiring sufficient capital to

complete development.

That this is the case should not be surprising. Almost every existing ELV today

was an evolutionary derivative of a successful, prior existing, and operational

system. This is as easy as development can get, yet such projects still require

staggering amounts of capital and many years to complete. And even with the

expertise of the aerospace industry giants and large consortiums, a very high

percentage of these new ELVs fail on their first launch. On top of all of this, ELVs

are far less complex and far easier to develop than RLVs since all the components

need only work once and many additional ones are required for reentry, landing,

health monitoring, etc.

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Figure 14 Some of the Entrepreneurial RLV and ELV Ventures since the 1970s

Entrepreneurial Developers Almost Exclusively Use Current Technology

“It’s The Operations, Stupid! Not More Technology”

- Lt. Col. Jess M. Sponable (USAF, Ret.) 375

With recognition of the daunting challenges and risks facing an entrepreneurial

RLV developer, and an industry consensus that current technology is probably

sufficient for constructing an RLV,376 it is no wonder that almost all of the

entrepreneurial designs employ current technology almost exclusively. Additionally,

most ventures also emphasize their use of commercial off-the-shelf components

wherever possible, notably Russian liquid oxygen / kerosene rocket engines. These

companies generally hold little intellectual property protection other than on an

architectural level or for special discriminating innovative designs, such as Kelly’s

patented tow-launch assist, Kistler’s landing recovery system, or Pioneer’s aerial

375 “It’s The Operations, Stupid! Not More Technology,” title of an editorial letter in Aviation Week & Space Technology, originally published May 24, 1999, www.aviationnow.com. Lt. Col. Sponable also served as Program Manager for the DC-X and Military Spaceplane Programs, Kirtland Air Force Base, NM.

1970 1980 1990 20001975 1985 19951970 1980 1990 20001975 1985 1995

Rotary Rocket

Kelly Space & Technology

Space Access

Pioneer Rocketplane

Kistler Aerospace

OTRAG

AMROC

Space Services Inc. EER Systems

Beal Aerospace

Starstruck

1970 1980 1990 20001975 1985 19951970 1980 1990 20001975 1985 1995

KeyELV Ventures

RLV Ventures

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propellant transfer. Most of the few entrepreneurial launch vehicle developers that

did more extensive technology development perished (e.g. Beal, Rotary Rocket,

Starstruck, American Rocket Company).

The risk of success in developing complex new RLV technologies is very high.

Even with some $3 billion invested, NASP was still stymied by the complexity, cost,

and integration of a myriad of advanced technologies required to develop or

integrate its high technology airbreathing engines. X-33 was similarly stalled with its

high technology rocket engine and advanced composite propellant tanks. The list of

RLV and ELV vehicle development programs that failed due to failed critical

technology development is long.

With the limited human resources and complementary assets held by the

entrepreneurial firms, and the great challenges posed by integration, the low

technology approach appears to be the most sensible. The furthest along of any of

the entrepreneurs, Kistler, has followed this tactic more strictly than the other leading

RLV developers, diverging from a classic ELV design the least.377 Kistler reportedly

originally developed their K-0 design in 1993 – 1994 but scrapped it in 1995 due to

the management decision that the design relied too much on immature

technology.378

Trend in Design Simplicity

Related to the call for no new technology is a philosophical design approach for

RLVs or their critical systems and subsystems that seems to be becoming more

predominant with RLV technology developers. This approach is the purposeful

eschewing of design complexity for simplicity, epitomized by the expression, “Keep it

simple, stupid” or KISS. Generally, the more complex the system, the higher the

parts count, cost, and risk of failure, and the more difficult and expensive it is to

376 Although there is some debate whether a full order of magnitude cost reduction could be realized. 377 Kistler is the only leading entrepreneurial RLV concept not to employ wings. At least one, less mature suborbital RLV developer, TGV Rockets, plans to follow suit.

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operate. A KISS design approach can produce very powerful results. Under AFRL’s

Integrated Powerhead Demonstration program, for example, careful design and

investment in particular technologies allowed part counts in a rocket engine’s oxygen

and hydrogen turbopumps to be reduced by factors of 9 and 3, respectively. This

greatly increased estimated reliability and decreased manufacturing costs.379

Ariane’s design simplicity and modularity helped Arianespace wrest considerable

market share from U.S. competitors and was obtained by ESA’s use of “…a high

degree of commonality in the design of different vehicle stages, and evolutionary

design from one vehicle to the next.”380 Likewise, Airbus’s dominance over Boeing

through much of the 1990s is also partially attributed to the former’s fundamental

design philosophy of simplicity and modularity.

Kistler CEO, Dr. George Mueller, discussed simplicity in his testimony to the

House Subcommittee on Space and Aeronautics in October 1999: 381

“Our most important design criterion is simplicity. Kistler is NOT a

development program for new technologies. Rather we are using only

proven technologies adapted for our purposes. We are building a truck

for delivering payloads to orbit.”

Stepping Stone, “Build a Little, Fly a Little” Approach

Simplicity is not only important for launch vehicle design but in the design of the

overall development program as well. One of the reasons why NASA’s experimental

RLV demonstrators are failing at an alarming rate is their very high level of

complexity, induced by their attempt to leapfrog evolutionary technologies. Rather

378 Mueller, G.E, et al., “Building The K-1 Reusable Aerospace Vehicle As A Commercial Venture,” 50th International Astronautical Congress, Amsterdam, The Netherlands, October 4 - 8, 1999. 379 From Karasopoulos, Harry, Space Operations Vehicle Technology Program status briefing, Air Force Research Laboratory, AFRL/VA, Wright Patterson Air Force Base, OH, December 1999. Original information provided by Integrated Powerhead Demonstration program manager, Matt Jones, AFRL/PRRE, Edwards Air Force Base, CA. 380 United States Congress, Office of Technology Assessment, Reducing Launch Operations Costs: New Technologies and Practices, OTA-TM-ISC-28, Washington, DC, September 1988. 381 Mueller, George, Written Statement of Kistler Aerospace Corporation, Presented at the “Commercial Spaceplanes” hearing to the House Subcommittee on Space and Aeronautics, U.S. Congress, 13 October 1999, www.house.gov/science/.

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than a pragmatic, stepping stone solution to system development as epitomized by

the classic, iterative “build a little, fly a little” approach NASA employed so effectively

in the 1950s, 1960s, and 1970s with experimental aircraft,382 NASA has consistently

attempted to skip intermediate steps in a rush to a final 2nd generation RLV solution.

The failures of the very costly and very complex X-30, X-33, and X-34 programs to

achieve their ambitious goals are examples of the outcome of abandoning the more

evolutionary stepping-stone approach. In contrast, DoD’s modestly funded DC-X

and X-40A programs set challenging but practical goals which they very successfully

achieved.

As noted in Chapter 5, perhaps one of the most important outcomes of the X

PRIZE will be the focus the contest is providing on incremental development of

reusable launch vehicles. Rather than requiring orbital RLV flight to win the prize, it

can be won by the relatively modest accomplishment of a suborbital flight. By this

approach, the X PRIZE Foundation is wisely encouraging a stepping-stone,

evolutionary development for full-scale, orbit-capable RLVs, and thus increasing the

likelihood of success. This circumvention of the time-honored, but almost always

failing, technology “leap-frog” or revolutionary approach is both pragmatic and

admirable.

Disruptive RLV Technologies versus Disruptive RLV Systems

A successful Reusable Launch Vehicle (one that could meet NASA’s 2nd

generation RLV goals of a reduction of launch costs and an increase in safety from

current Shuttle values of about $10,000 per lb to LEO and 0.993, to $1,000 per lb to

LEO and 0.9999, respectively) would indisputably be a disruptive product, and would

revolutionize the space industry. Interestingly, it appears that the RLV research

community has nearly always implicitly assumed that revolutionary technology

382 A succession of aircraft X vehicles was produced over these years with incrementally increasing performance. Some of these represented an evolutionary exploration of aircraft handling characteristics at speeds near and greater than the speed of sound, Mach 1. Unfortunately, the prevailing opinion of RLV development is that the intermediate steps can be skipped to save development costs. In following this revolutionary product development approach, however, we fail

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advances are required in order to create a revolutionary product. This is not the

case with some very complex, highly nonlinear systems such as RLVs where

integration of a myriad of evolutionary technology advances can sum to a

revolutionary product, that is, a reusable launch vehicle having a revolutionary

performance capability.

This is an important hypothesis worth restating somewhat differently for clarity:

with the highly nonlinear relationship between RLV integration and performance, it

stands to reason that the proper integration of a number of sustaining technological

advances into a suitable reusable launch vehicle design can produce a final RLV

system having a disruptive performance capability. The suitable RLV design is one

that is produced by a system engineering analysis of the entire RLV system,

including ground and flight operations. Rather than the traditional approach of trying

to integrate a collection of RLV systems, subsystems, or even components, each

individually developed by specialists via optimization with component-specific payoff

functions, system engineering optimizes the design of the entire system for the

overall performance parameters of interest – in this case system cost and

reliability.383

The more traditional approach, unfortunately, is thus that of isolated component

specialization and optimization. This approach is strengthened by the high level of

technological complexity of even the minutest components, resulting in laboratories

where technology specialists are now the norm and generalists very rare. The

professional interests of the researchers usually serves to strengthen their

enthrallment with disruptive technologies; the lure of high technology is often

far more often with the consequence that accumulated RLV development costs far exceed those that a more evolutionary series of experimental developments would have entailed. 383 The definition of system versus subsystem versus component can be a bit blurry in the literature. Here I assume the term “system” refers to the overall reusable launch vehicle and all of its complementary assets required for operations such as launch facilities and infrastructure, the operators themselves, maintenance and refurbishment staff and equipment, etc. The term “subsystems” thus refers to major RLV systems such as propulsion, thermal protection, controls, etc. Lastly, the term “component” or “sub-subsystem” would be the next breakout below, such as a hydrogen turbopump (itself an intricate system) or an actively cooled wing leading edge heat pipe.

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dizzying for RLV development managers and engineers who succumb to the mirage

of exciting, potentially disruptive, subsystem technologies – technologies that might

prove to provide a disruptive performance capability for the subsystem in isolation -

and lose sight of overall system objectives. In the case of RLVs, upon attempting to

integrate the disruptive subsystem into a complex system, a plethora of integration

problems inevitably erupts, converting the once seemingly revolutionary gain into a

hopeless loss of overall system performance. RLV designers found this to be the

case with the NASP program with the revolutionary, advanced airbreathing

propulsion system, spending billions of dollars to discover their error.

Unfortunately, evolutionary technology advances are not very interesting to many

RLV scientists, engineers, and managers. They are often motivated and rewarded

more for flailing away at a flashy, revolutionary, technology project for years on end

before admitting defeat than for succeeding at a sensible, evolutionary technology

project that by itself provides only a modest advancement but, as a critical part of an

integrated whole, can enable a revolutionary RLV. Conventional technology

management teachings point out the competitive advantages of innovation, of

disruptive technologies, and of risk taking. Unfortunately, revolutionary technology

development efforts are often misdirected, focusing on subsystem optimization

parameters that do not optimize the overall RLV system. Such programs can drain

valuable limited resources away from evolutionary technology projects that are

critical to the RLV system. This is not to recommend abandoning innovative, high-

risk RLV subsystem technology development projects, but rather ensuring: (1)

overall system optimization is carried out to discern what the proper subsystem

optimization parameters should be, and (2) a proper balance of the technology

portfolio is maintained, by tuning it specifically for the nonlinear integration problem

of RLVs.

Knowledge Capture & Lessons Learned

Lessons and mistakes learned from past efforts are crucial to future RLV

development, and especially so while RLVs are in their infancy stage. The tens of

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billions of dollars spent on operations inefficiency with the Shuttle, for example, will

be wasted if the associated, invaluable design and operations knowledge is not

applied to future RLV generations. The same holds true for the many more billions

of dollars spent on failed technology development programs such as NASP, X-33, X-

34 and others.

As the world’s only operational first generation RLV, the engineers, technicians,

and mangers that work on the Space Shuttle program at Kennedy Space Center in

Florida and elsewhere should be the focus of a massive knowledge capture effort.

The countless years of experience and expertise of those who have worked or are

currently working the program should be mined with vigor. Likewise, a massive

learning effort by 2nd generation RLV designers and program managers should be

undertaken in order to take advantage of this knowledge. Curiously, two interviews I

conducted last year with mid-level NASA Kennedy space shuttle managers indicated

that little was being accomplished in this area. One interviewee even expressed his

disappointment that the separate NASA RLV development program offices located

at NASA Marshall Space Flight Center in Huntsville, Alabama very rarely interacted

with Space Shuttle operations personnel and didn’t seem interested in their working

knowledge. Hopefully, industry is doing more in this area although I could find no

evidence of it in the open literature. On a more positive note, NASA is now

beginning to apply a knowledge capturing process although it seems likely it will take

considerable time to ramp up and become effective.384

It seems blatantly obvious that explicit knowledge capturing and sharing

techniques should be applied to acquire and utilize as many of these lessons-

learned as possible from past RLV programs. Mining the Space Shuttle program

should be the highest priority since the rate of knowledge dissipation is likely high:

the Shuttle was developed in the 1970s, some 30 years ago, and retirements must

be seriously eroding the knowledge base. Fortunately, some past work has been

done in capturing Shuttle operations experiences. One excellent classic that should

384 Matthews, William, “NASA plans knowledge database,” Federal Computer Week, April 17, 2000.

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be studied carefully by all current RLV developers is the report, Reducing Launch

Operations Costs: New Technologies and Practices, by the Office of Technology

Assessment of the United States Congress.385

U.S. Government Investment

The primary motive for government investment in space transportation was

initially national security and national prestige. As time passed, however, other

considerations, such as keeping a skilled labor force employed and maintaining an

advanced scientific and engineering research and development capability, also

weighed-in and become a part of national strategy. Further, over the years the value

of the space industry to our nation’s economic and strategic well-being has risen

dramatically, and the future potential is even more compelling. Large

macroeconomic benefits can likely be realized by proper government investment in

reusable launch vehicles. Successful RLV development will greatly increase space

launch affordability, flexibility, and responsiveness, and decrease launch price. If

prices fall sufficiently, market elasticity will likely drive a large, nonlinear increase in

space business activity in many areas including some of the emerging markets

discussed in Chapter 3. This should provide large increases in tax revenues,

exports, and employment. Lower launch costs would also lower costs for

government space projects, allowing additional missions for a fixed investment.

Typically, the United States government has relied on industry to bear much of

the costs and risks for major new systems and their infrastructures. Where deemed

too critical for national interests to wait for a market-driven development effort,

however, governments have often stepped into the fray, providing assistance in

funding, incentives, and other instruments to catalyze or directly support technology

and infrastructure development. Historical examples include railroads, aviation, and

electrical power; many feel the government should do the same for reusable launch

vehicles.

385 United States Congress, Office of Technology Assessment, Reducing Launch Operations Costs: New Technologies and Practices, OTA-TM-ISC-28, Washington, DC, September 1988.

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Investment decisions by government and industry often are made using a cost-

benefit analysis, usually via discounted cash flow or return on investment. However,

their analyses of the same project will produce very different results. Large-scale

technology development projects such as RLV development are often long-term,

high-cost investments that are acceptable to government but not industry. Industry

has equity investors to placate and profit margins to maintain. Industry’s interest

rate for financing such high risk programs is generally very high – for an RLV

program possibly 25% or more - and thus industry’s time horizons for return-on-

investment are generally short. The government, on the other hand, can afford to

wait 30 or more years to realize a payback, and the payback can be much lower as

the government pays only a small risk premium above the inflation rate. But even if

the government can afford to invest vastly differently than industry, it often doesn’t.

Hertzfeld argues that the United States government often makes investment

decisions very much like that of corporations, focusing primarily on the short-term,

bottom-line profit position.386 The U.S. government’s short-term focus contrasts

sharply from that of many other governments, and in some cases prove to be

detrimental to the U.S.’s global competitive position. A good aerospace example

posed by Hertzfeld is the case of the Concorde commercial supersonic transport

(SST).387

Although the United States had the technical capability to develop a commercial

SST (as evidenced by the XB-70 and XR-71 aircraft), the U.S. opted not to develop

the aircraft due to the poor business case for the venture, which was predicted to be

unprofitable. The British and French were not thwarted by such economic

pessimism and charged ahead. With significant effort they succeeded in developing

a successful, delightful commercial aircraft that was the envy of the world. However,

386 Hertzfeld, Henry R, “Economic, Market, and Policy Issues of International Launch Vehicle Competition,” in International Space Policy, Papp, Daniel S, and John, McIntyre, R., Editors, Greenwood Press, Inc., Westport, Connecticut, 1987. 387 Ibid.

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the U.S. analysts were correct - the British and French joint SST program was by

itself a financial failure. It was, however, a technical triumph. More importantly,

Hertzfeld compellingly makes a case that in the long-term the British and French

probably made a very shrewd and profitable investment due to SST program’s

intangible benefits of (1) thrusting the United Kingdom and France to the forefront of

aerospace technology388 by training and creating a highly skilled engineering labor

force, and (2) providing a nationalistic technological confidence in aerospace

excellence that was successfully leveraged in subsequent aerospace endeavors

such as the development of the Airbus aircraft family, the Ariane ELV, and other

highly globally competitive programs. Hertzfeld asks,389

"If not for the Concorde, would French industry have been able to

design, build, and successfully market the Airbus? Would the Ariane

launcher as a commercial vehicle have been undertaken and been

successful?"

While we will never know the factual answer, intuitively there was an obvious

vast return on investment, one far greater than a Net Present Value calculation could

disclose. The straightforward analogy is that the country that invests the

considerable capital needed to successfully develop a 2nd generation reusable

launch vehicle may also reap many rewards beyond the already impressive

economic ones.

RLV Barriers to Entry

The space launch industry is characterized by very large barriers-to-entry, so

large in fact that nearly every successful ELV entrant was originally sponsored by its

respective government. Among these barriers are very high technical and

developmental costs and risk, significant market risk, large financial investments,

legitimacy, lengthy research & development cycles, heavily subsidized competition,

388 Prior to the program they were technologically behind the U.S.

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insurance risk,390 long production cycles, long test and evaluation cycles, regulatory

risk,391 and large economic rents for infrastructure, knowledgeable human

resources,392 and demonstrated past performance to obtain new contracts. Many of

these barriers to entry have already been addressed or at least alluded to in prior

sections. Unfortunately, the scope of this thesis did not allow me to address the

remainder except for an overview of financing and legitimacy issues, which are

critically important to entrepreneurial reusable launch vehicle development. This

section thus presents a brief introduction to financial and legitimacy barriers to entry,

recognizing that both issues deserve a more detailed examination. The legitimacy of

government agency RLV technology development is also discussed.

Financing Issues

The multi-billion dollar government investments in reusable launch vehicle

technology over the past decade have both helped and hurt entrepreneurial RLV

developers. While potential beneficiaries of any government-developed technology

that are not subject to contractor proprietary limitations, most entrepreneurial RLV

developers are relying instead on current technology, and in most cases,

commercial off-the-shelf solutions. Thus most of these ventures view NASA

investment in RLV technology and especially in RLV flight demonstrators as direct

389 Hertzfeld, Henry R, “Economic, Market, and Policy Issues of International Launch Vehicle Competition,” in International Space Policy, Papp, Daniel S, and John, McIntyre, R., Editors, Greenwood Press, Inc., Westport, Connecticut, 1987. 390 See for example the excellent assessment by Moore in: Moore, Roscoe M, III, “Risk Analysis And The Regulation Of Reusable Launch Vehicles,” Journal of Air Law and Commerce, Vol. 64, No. 1, Winter 1998, p. 245. Moore notes that the safety risk of an RLV could be particularly high for reentry due to a number of factors including RLV’s extensive use of thermal protection materials, and higher coefficients of lift for debris. 391 See for example the following: “RLV Startups Have Enough Capital, But Worry About Regulation,” Aerospace America, Vol. 185, No. 29, February 13, 1998, p. 232; and “Industry Praises RLV Regulatory Effort but Questions Cost and Risk,” Aerospace Daily, Vol. 191, No. 13, July 20, 1999. 392 Recruiting and retaining talented and highly educated staff can be challenging today in the space launch technology arena. This is due to a number of factors including: (1) relatively easy migration to higher paying high technology jobs in more trendy industries such as Internet, biotechnology, communications, etc.; (2) repeated national program failures and cancellations provide a poor sense of accomplishment and generates little excitement – my generation has yet to succeed on a large RLV development program - whereas other industries actually offer opportunities to complete projects; (3) erosion of the experienced launch vehicle designer and operator experience base due to retirement. The latter is especially disheartening, especially the loss of extensive invaluable Space Shuttle operations and design knowledge.

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subsidization of their competitors. And not just any competitors: the vast majority of

this government funding has been given to established launch industry incumbents

Boeing Aerospace Company and Lockheed Martin Corporation who, in the eyes of

the entrepreneurs, are the least needy and perhaps least deserving of taxpayer

money. Indeed, the $912 million spent by NASA on the failed Lockheed Martin X-33

program was especially irksome to other RLV developers not only because they felt

they should have been recipients of a piece of it, but also because of the competition

for financial investors from Lockheed’s planned follow-on VentureStar commercial

RLV program.

“One of the worst consequences of the X-33 and X-34 fiascos was that

they effectively prevented private RLV companies from being able to

raise commercial investment for the last six years, since investors

cannot afford to compete with government projects – which suited

NASA fine.”

- Space Future Journal 393

It is interesting to see the change in the perceived financial climate for the RLV

developers as portrayed in the literature over the past five years. “RLV Startups

Have Enough Capital, But Worry About Regulation,“ was the headline of an

Aerospace Daily article as recent as February 1998, in which top officials of Pioneer

Rocketplane Corporation, Rotary Rocket Company, Kelly Space & Technology, and

Kistler Aerospace Corporation all indicated they anticipated no trouble raising the

capital they needed to develop their RLVs.394 The very strong U.S. economy and

bull market apparently appeared at that time to be an ideal setting for acquiring

financing. But something went wrong and sufficient capital never materialized. Most

of these entrepreneurial ventures succeeded in raising only a small fraction of the

total development funds required. Kistler was an exception, raising over half a billion

393 “X-34 Joins X-33 as Fiasco,” Space Future Journal, September 19, 2000. 394 “RLV Startups Have Enough Capital, But Worry About Regulation,” Aerospace America, Vol. 185, No. 29, February 13, 1998, p. 232.

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dollars, but still only roughly half of that needed to bring their K-1 RLV to an

operational status.395

What went wrong is undoubtedly a combined effect from many factors but which

single factor dominated is anyone’s guess. Although investment money reached

record highs over the past few years, with angel investors and investment capitalists

seemingly rolling wheelbarrows of money to anyone with a business plan, their focus

was on other high technology arenas such as the Internet, communications, and

biotechnology. The opportunity costs were and apparently are still too high. I think

Jess Sponable said it best near the peak of the dot.com frenzy with:

”In an era where billions of dollars are routinely invested in Internet

vaporware, it is ironic that the current business environment won’t

support investments in next generation transportation.”

- Jess Sponable, Universal Space Lines, July 1999 396

Another factor creating difficulty for RLV developers to find financing was the

large drop in the expected demand for LEO commercial launches in the late 1990s.

As noted in Chapter 3, FAA’s ten year LEO launches forecast dropped by

approximately 50% from its boom prediction in 1997 to 2000 and recent articles with

titles like, ”Launch Supply Could Exceed Demand for Next Decade,” are now the

norm.397 Such demand volatility would be unsettling in almost any market.

The financial failure of the Iridium system in August 1999 had a profound effect

on the ability of both new and established space enterprises to generate investment

capital. Called the “Iridium Effect” by some in the space and financial community,398

it shook investor confidence to the core. ICO, Orbcomm, and Globalstar quickly

395 Kistler’s financial challenges were discussed in more detail in Chapter 5. 396 Sponable, Jess, “Opening the Spaceways,” Conference on Next Generation Launch Systems, Space Technology and Applications International Forum, STAIF-00, Albuquerque, NM, 2000 (Also in Space Policy Digest, July 1999, www.spacepolicy.org/page_js0799.html). 397 Ferster, Warren, ”Launch Supply Could Exceed Demand for Next Decade,” Space News, January 22, 2001, p. 8. 398 “The Year in Review: Space Systems,” Aerospace America, December 2000.

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followed into financial distress, further eroding investor interest in space related

ventures as well as decimating LEO demand.

Other factors are likely culprits. The high barriers to entry mentioned above are

not secret and would be obvious with an even meager effort of due diligence. And

some investors must have reasoned, “why invest in very high risk space launch

ventures when every past entrepreneurial ELV and RLV commercial development

ventures has failed?” or “How can a small entrepreneurial RLV company

accomplish what the industry giants with their vast resources could not, even with

NASA’s technical help and billions of dollars?”

It appears that financing launch vehicle system development is very difficult and

will require large amounts of risk capital that far exceed venture capital markets.

Thus, large corporate joint ventures, syndicates, United States government, or other

large funding sources will be necessary. U.S. government involvement in the

financing equation could take many forms, both direct and indirect. In 1999

congressional testimony, for example, Kelly Space and Technology Inc. strongly

supported reductions in or the elimination of capital gains taxes on returns made

from space business development investments. Kelly also called for NASA,

“prudently guided by Congress,” to invest in small companies that offer

entrepreneurial space launch concepts, funding design, development, and flight test

of demonstrators.399

Recognizing the difficulties RLV developers were having acquiring funding, in

1999 Sen. John Breaux (D. Louisiana) sponsored the Commercial Space

Transportation Cost Reduction Act, Senate bill S. 469. This remake of S. 2121,

introduced the prior year, called for the establishment of Federal government loan

guarantees for RLV companies.400 Discussions on this bill of what government

399 Davis, Robert, Testimony on Commercial Spaceplanes, Presented at the “Commercial Spaceplanes” hearing to the House Subcommittee on Space and Aeronautics, U.S. Congress, 13 October 1999, www.house.gov/science/. 400 Ibid.

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could do to improve RLV development revolved around the following: investments in

research and development to reduce technical risk; incentives via loan guarantees;

incentives from advance purchase agreements; incentives via tax credits, and

improvement in “the investment climate through policy stability, regulatory

streamlining, predictable certification, and appropriate indemnification.”401

Support for Senate bill S. 469 from industry was lopsided. Although championed

by Lockheed, S. 469 generated little enthusiasm among many of the RLV

entrepreneurial firms with perhaps the exception of Space Access. Boeing stated

their preference instead for government-funded research and development of high-

risk technologies. Other entities stated their concern that the bill might be too

focused on Lockheed Martin, and furthermore expressed their concern on how to

determine what companies would be selected to receive these loans. Some argued

politics, ignorance, or perhaps a bias towards certain companies, past technologies,

and launch system architectures by the evaluators (likely to be NASA or the

Department of Transportation) may preclude the best option from being selected. 402

Some financial experts pointed towards the effectiveness of government loan

guarantees. According to Hoyt Davidson of Donaldson, Luftkin, and Jenrette of New

York, government loan guarantees would allow RLV financing for “not much more

than the Treasury rate versus the 35 - 50% rates of return required by venture

capitalists for projects in the early development stage.”403 However, Hawthorne,

Krauss & Associates, a NASA consultant hired to analyze these issues, urged

caution on implementation of loan guarantees for RLV development. The consultant

noted that such guarantees could shift far too much risk onto the government, thus

critically reducing the developer’s motivation to perform well – yet allowing the

developer to reap the financial rewards. Hawthorne, Krauss & Associates instead

401 Johnson, Kristine, “Hearing on the U.S. Commercial Space Launch Industry before Senate Subcommittee on Science, Technology and Space, September 23, 1998,” NASA Memorandum for Record, September 23, 1998. 402 Ibid. 403 “Loan Guarantees Required to Obtain VentureStar Financing, Lockheed Says,” Aerospace Daily, Vol. 190, No. 39, May 25, 1999, p. 1.

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recommended “the government take the role of second guarantor, so that creditors

must seek repayment from the borrower and any parent companies before turning to

the government for repayment.” 404

Although S. 469 fizzled, numerous other proposals for direct U.S. government

involvement in supporting RLV development have been proposed and debated,

including Rep. Dana Rohrabacher’s “zero-gravity, zero-tax” bill.405 More information

on such options and excellent discussions of the effectiveness of various

government incentives for RLV development are given by Shaw et al.,406 Scottoline

and Coleman,407 and Greenberg.408 Discussed in these articles are numerous

options including advanced purchase agreements, tax credits, tax holidays, targeted

tax rebates, loan incentives, loan guarantees, insurance & indemnities, and

government capitalization.

Government help in acquiring critical financing to enable aerospace vehicle

development is neither exclusive to entrepreneurial firms nor to the last decade. In

1971 Lockheed successfully sought government loans necessary to manufacture

their L-1011 Tristar commercial aircraft. In testimony during Congressional

hearings, Lockheed asserted that they could not develop this new aircraft without the

requested quarter billion-dollar loan (1971 dollars). Lockheed was successful in this

request although the company eventually lost significant funds on the L-1011

404 From: “NASA Consultant Urges Caution on Loan Guarantees for RLV,” Aerospace Daily, Vol. 188, No. 29, 10 November 1998, p. 225; and Hawthorne, Kraus & Associates, LLC, Analysis of Potential Alternatives to Reduce NASA’s Cost of Human Access to Space, 20 September 1998. 405 Sietzen, Frank, Jr, “Conversations with Dana Rohrabacher,” Aerospace America, March 2001. 406 Shaw, Eric J, et al., “Benefits of Government Incentives for Reusable Launch Vehicle Development,” IAF Paper 98-1201, 49th International Astronautical Congress, Melbourne, Australia, September 28 - October 2, 1998. 407 Scottoline, S, and Coleman, R, “Effectiveness of Loan Guarantees versus Tax Incentives for Space Launch Ventures,” AIAA Conference on Space Technology, Albuquerque, New Mexico, 28 - 30 September 1999. 408 Greenberg, Joel S, “RLV Government/Industry Economic/Financial Issues,” AIAA Paper 2000-5097, AIAA Space 2000 Conference and Exposition, Long Beach, CA, Sept. 19-21, 2000. Also see: Greenberg, Joel S, “Considerations When Analyzing Investment In Space Transportation Business Ventures,” 50th International Astronautical Congress, Amsterdam, The Netherlands, October 4 - 8, 1999.

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business venture.409 In 1999, Lockheed Martin again testified in congressional

hearings, once again arguing that loan guarantees are needed. This time, however,

the target for the government loans was their VentureStar reusable launch vehicle

concept.410

Lockheed was poised in the early 1970s to begin manufacturing of their L-1011

after spending a billion dollars on concept development. At the time Lockheed was

deemed more than technically capable of building and selling the aircraft. However,

their financial house was a mess and as a consequence banks would not loan

Lockheed money to build its manufacturing facility.411 This, for an aircraft that was

evolutionary in nature and for a company with numerous commercial aircraft

successes in their past. Today’s Lockheed Martin, in contrast, is trying to do

something that has never been before accomplished - build an RLV. The technical

risks are huge as evidenced by the development pains experienced by their X-33

vehicle, the technology demonstrator for their VentureStar.

Interestingly, Hertzfeld asserts that failures in entrepreneurial ELV ventures of

the early to mid 1980's (e.g. OTRAG, Starstruck, Transpace Carriers, etc.) were due

to a "combination of market timing, financing, and the government's reluctance to let

go of controls."412 It seems nothing has changed.

409 See: Reinhardt, U.E, “Break-Even Analysis for Lockheed’s TriStar: An Application of Financial Theory,” Journal of Finance, Vol. 28, No. 4, September 1973, p. 821; and Maital, Shlomo, Executive Economics – Ten Essential Tools for Managers, The Free Press, Simon & Schuster Inc., New York, New York, 1994. 410 See: Cowing, Keith, Editor, “Space Transportation Architecture Studies: Future of Earth-to-Orbit Spaceflight,” Hearings before the House Committee on Science’s Subcommittee on Space and Aeronautics, NASA Watch, 27 October 1999; and “Loan Guarantees Required to Obtain VentureStar Financing, Lockheed Says,” Aerospace Daily, Vol. 190, No. 39, May 25, 1999, p. 1. 411 Maital, Shlomo, Executive Economics – Ten Essential Tools for Managers, The Free Press, Simon & Schuster Inc., New York, New York, 1994. 412 Hertzfeld, Henry R, “Economic, Market, and Policy Issues of International Launch Vehicle Competition,” in International Space Policy, Papp, Daniel S, and John, McIntyre, R., Editors, Greenwood Press, Inc., Westport, Connecticut, 1987.

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Legitimacy Issues

Since reliability is such a primary concern to customers, legitimacy plays a major

role in the sales of launch services, particularly for future market entry of a small

entrepreneurial firm with no established brand image and little manufacturing or

integration experience. Some legitimacy concerns could be mitigated if the small

entrepreneurial firm contracts to established industry figureheads for at least all

critical systems and subsystems, if not integration as well. Some in the current wave

of RLV entrepreneurs are utilizing these resources as part of their strategy to use

current technology and commercial off-the-shelf components wherever possible.

RLV developer Kistler Aerospace, for example, has made extensive use of expert

contractors to design and manufacture K-1 components, including Lockheed Martin,

Northrop Grumman, GenCorp Aerojet, Draper Laboratory, AlliedSignal Aerospace,

Irvin Aerospace, and Oceaneering Space Systems.413

Historically, small new entrants have essentially “bet the company” with each

launch. A failure means an extended period of further engineering and redesign,

often a showstopper for companies already with many years without incoming cash

flows. Larger firms such as the incumbent primes, Boeing Aerospace and Lockheed

Martin, have sufficient capital to fund any required additional development and

sufficient brand to instill confidence in declared corrections of launch vehicle flaws.

To them, a failed launch is troublesome but not life threatening. A new

entrepreneurial RLV market entrant, however, will likely have neither the capital nor

the brand to overcome an early catastrophic launch failure. Only with customer-

perceived legitimacy can the RLV venture wrest market share from well-established

space launch incumbents in an economically viable period of time. An Aerospace

America article from November 1996 nicely sums up the legitimacy challenge facing

RLVs: 414

413 Mueller, George, Written Statement of Kistler Aerospace Corporation, Presented at the “Commercial Spaceplanes” hearing to the House Subcommittee on Space and Aeronautics, U.S. Congress, 13 October 1999, www.house.gov/science/ 414 Grey, Jerry, “The Rocky Road to Space-Launch Heaven,” Aerospace America, November 1996.

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“The last seven ‘new’ vehicles all failed on their maiden flights: Orbital

Science’s Pegasus XL, EER’s Conestoga, Lockheed Martin’s LMLV-1,

China Great Wall’s Long March 2E and 3B, the first five-stage version

of Russia’s Start-1, and – most recently and most noteworthy – Ariane

5. With a wholly new technology base, the RLV is not likely to enjoy

great customer confidence until it has demonstrated its reliability

conclusively, even if it is offered at a price significantly lower than that

of current competitors. This was clearly demonstrated by the loss of

confidence in China’s Long March rockets after their back-to-back

failures, despite their relatively low launch prices.”

Legitimacy plays an even more critical role when the payload is human. Even

with adequate reusable launch vehicle offerings, the space tourism market will never

grow significantly until the customers’ perception of safety is satisfied.415 Public

acceptance of a new space tourism business based on a new RLV concept will be

obviously heavily influenced by the perceived legitimacy of the company offering the

service. The company’s legitimacy and its ability to obtain investment capital,

however, are also influenced to some extent by the overall industry’s safety and

reliability records.

Legitimacy of certain elements in the space launch industry is already

questionable today, leading to the commonly heard quote by industry experts, “the

flake factor is huge in the launch business.” This and similar expressions refer to a

number of usually well meaning, enthusiastic, but often unknowledgeable persons

who form a very vocal minority and at times have surprisingly strong political clout.

Conspiracy theories such as how NASA and the U.S. government are purposely

trying to suppress entrepreneurial RLV efforts can be found on the Internet, and

even occasionally in other news media. It seems, sometimes, that almost anyone

these days can establish a web site with their own back-of-the-envelope RLV

design, often with performance claims exceeding reality by at least an order of

magnitude, attempting to encourage rightfully cautious investors to provide them

415 This is discussed in more detail in Chapter 3.

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funding to support their hobby. Blatantly technically unviable RLV concepts regularly

periodically appear in national news stories and television programs.

The fringe can even be more interesting. Unsolicited RLV proposals for designs

employing mysterious anti-gravity devices, others using their stereotypical UFO

shapes to somehow achieve aerodynamic performance so incredible as to negate

the need for engines to travel to and through space, and still others that use

helicopter rotors to propel them through “the ether of space” have all graced my

work desk within the last decade. It seems doubtful that any other industry receives

so much attention by so many enthusiasts. The allure of space is heady.

There may also be spillover of negative impact to RLV legitimacy from high

profile problems with other space projects. The enduring classic case is NASA’s

International Space Station, currently called (in its incomplete state) Space Station

Alpha. The ISS program is very tenacious, surviving 22 termination attempts in

NASA funding bills since 1991.416 The original space station design, Space Station

Freedom, had a total price tag of $8 billion in 1984. After 9 more years of work and

extensive cost growth, Freedom was redesigned into the International Space Station

in 1993 with a cost estimate of $17.4 billion for project completion.417 In the

intervening years the cost has further inflated to today’s estimate of over $28 billion

for just the hardware alone. In over 16 years of work, with numerous redesigns and

cost cutting measures and with 16 nations now on board, the International Space

Station is now estimated by NASA to cost a total of $60 billion by assembly complete

in 2006.418 This figure includes operations and Space Shuttle transportation costs.

Furthermore, the General Accounting Office estimates the total cost for ISS over its

ten-year lifetime, including operations and transportation, will come to a staggering

416 Smith, Marcia, S., “U.S. Space Programs: Civilian, Military, and Commercial, Issue Brief for Congress, January 22, 2001. 417 Wheeler, Larry, and Siceloff, Steven, “Space Station Could Cost Another $4 Billion,” Florida Today, February 17, 2001. 418 Morring, Frank, Jr, “NASA Told To Cover $4B Station Cost Overrun,” Aerospace Daily, 15 February 2001.

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$95 billion.419 While undeniably a fascinating program, it may be hard for the public

to maintain optimism and confidence in its utility in face of such overwhelming

schedule and cost overruns. And any negativity in the public’s image of large space

investments, whether public or private, are sure to have impact on entrepreneurial

RLV firms in their attempts to raise capital.

The legitimacy of NASA, DoD, the incumbent aerospace industry, and new RLV

entrepreneurial ventures to develop an RLV is also seriously threatened by the

highly visible and extremely costly failures in developing RLVs and RLV technology

demonstrators. The false hopes and broken promises of NASP, X33, X34, and

other poorly designed and executed programs cost taxpayers many billions of

dollars and likely delayed the replacement of the Space Shuttle system by a more

cost effective, more reliable, and safer RLV system for a decade or longer. NASA’s

X-33 and X-34 programs may have had other negative effects as well, such as

discouraging private sector investment in commercial RLV ventures.

Numerous industry experts and industry watch groups have for years questioned

the legitimacy of NASA to develop a cost effective reusable launch vehicle system.

Critics’ fire has been fueled by the massive cost and schedule overruns of nearly the

entire crop of current NASA X vehicle programs, by the recent cancellations of the

X-33 and X-34 programs, the massive International Space Station cost and schedule

overruns, the Space Transportation Main Engine program, and the NASP X-30

program.

NASA’s problems in conducting successful RLV development programs have not

gone unnoticed,420 and will likely be scrutinized by the incoming Bush administration.

419 Wheeler, Larry, and Siceloff, Steven, “Space Station Could Cost Another $4 Billion,” Florida Today, February 17, 2001. 420 See for example: “Space Access Update #95, Space Access Society, August 27, 2000, www.space-access.org/updates/sau95.html; “Space Access Update #96, Space Access Society, September 26, 2000, www.space-access.org/updates/sau96.html; and Rohrabacher, Dana, “NASA’s Space Launch Initiative Is Off Course,” Aviation Week & Space Technology, February 19, 2001, www.aviationnow.com.

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One of the issues reportedly on the table is the issue of which U.S. government

organization will lead future RLV development.

NASA control of United States government RLV development was formalized in

the mid-1990s. The Space Launch Modernization Plan was produced in March

1994 as a tasking to DoD from Congress to develop a strategic plan to modernize

U.S. space launch. One of the major findings of the Space Launch Modernization

Plan (also known as the Moorman Report after Lt. Gen Thomas S. Moorman, Jr who

led the study team) was that coordination between DoD and NASA space launch

programs needed improvement.421 To this end, the Moorman Report recommended

that DoD take the lead in developing ELVs and NASA take the lead in developing

RLVs. This recommendation was accepted and made official with the 1994 National

Space Transportation Policy, which also called for the development of a

commercially viable reusable launch system. Shortly after this policy was released,

the Air Force initiated the EELV program and NASA developed an RLV development

plan, which included a series of flight demonstration programs: DC-XA (from DoD’s

successful DC-X), X-33, and X-34. The 1994 National Space Transportation Policy

was reaffirmed in the September 1996 National Space Policy.

Some debate whether DoD and NASA were assigned the appropriate roles.

Hays422 notes that military RLVs (military spaceplanes) would be a great deal more

useful than ELVs for many DoD space missions, whereas many civil satellite

launches are best suited for ELVs. A further consideration is whether either

organization is well suited to deal effectively with the increasing needs of the

commercial sector.423

421 Gonzales, Daniel, et al., Proceedings of the RAND Project AIR FORCE Workshop on Transatmospheric Vehicles, RAND Corporation, Santa Monica, California, 1997. 422 Hays, Lt. Col. Peter L., “Spacepower for a New Millennium: Examining Current U.S. Capabilities and Policies,” AIAA Paper 2000-5261, AIAA Space 2000 Conference, Long Beach, CA, 19 - 21 September 2000. 423 Ibid.

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While DoD’s role in jointly managing the NASP program with NASA was

disappointing, DoD’s RLV development efforts since then have been successful

even though executed with shoestring budgets. In fact, the last two successful

reusable launch vehicle technology demonstrators, the DC-X Delta Clipper / DC-XA

Clipper Graham and the X-40A Space Maneuver Vehicle, were both developed by

the Department of Defense. Both efforts produced successful flight test vehicles that

were transitioned to NASA for continued use after extensive Air Force testing.

Furthermore, the Delta Clipper was developed under budget and schedule, a stark

contrast to X33, X-34, and the rest. Likewise, the X-40A was developed and tested

for a pittance, at a fraction of the cost of the similar Japanese ALFLEX

program.424,425

DoD’s success, or NASA’s lack of it, has apparently caught the attention of the

new Bush administration. According to a recent SpaceRef.com article by Frank

Sietzen, Jr. on future U.S. space policy, congressional sources indicate the Clinton

Administration’s space transportation policy was received by the Bush

Administration as “dead on arrival.” 426 Sietzen further notes that: 427

“…with DoD Secretary Donald Rumsfeld strongly supporting military

space research that includes development of an Air Force spaceplane

and piloted quick reaction strike capability, NASA control of the RLV

development agenda is believed headed for the dustbin.”

424 Original cost and schedule projections on the original X-40A development contracts with Boeing, which the author managed, were rendered meaningless by large contract modifications to both scope and scale. The original Mini-Spaceplane Technology (MiST) program specified only system analysis and flight test vehicle design. The contract was sequentially modified to also fabricate the flight test vehicle, and then to require contractor to conduct extensive ground testing and an autonomous approach and landing flight test collaboratively with Air Force and Army flight test personnel. 425 See, among others: Karasopoulos, H., et al., “Space Maneuver Vehicle Development by the Mini-Spaceplane Technology Program,” AIAA 98-4149, AIAA Atmospheric Flight Mechanics Conference, Boston, Massachusetts, Aug 98; and Baker, Sue, “First Flight: Space Maneuver Vehicle Tries Its Wings,” Leading Edge Magazine, October 1998, p. 17. 426 Sietzen, Frank, Jr, “Spacelift Washington: U.S. Space Launch Policy Facing Uncertain Overhaul,” March 25, 2001, www.spaceref.com. 427 Ibid.

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However this plays out, the Bush Administration will likely be disappointed in the

results of future RLV development unless a pragmatic, evolutionary approach is

utilized. Without a careful “test and learn as you go” stepping stone development

strategy, future RLV technology demonstrator development will almost certainly fail

as NASP, X-33, X-34 and the rest did, by trying to short-cut fundamental learning

processes and by focusing too much on revolutionary technologies instead of the

overall, revolutionary, RLV system.

Technology and Market Entry Competitive Strategy

Market Entry

Traditional Market Entry of New Expendable Launch Vehicles

The very high costs associated with launch failure prompts a very conservative

approach by both launch vehicle manufacturers and their customers, the former in

adopting new technologies into their launch vehicle designs and the latter in signing

on with newly developed ELVs that haven’t yet established a record of reliability.

Even though the cost of a satellite is typically insured for launch, a company on a

tight schedule to initiate on-orbit, revenue-generating operations of a commercial

satellite can ill afford a launch failure; the opportunity costs of losing the asset’s

revenues while waiting for a replacement satellite to be fabricated and launched can

be quite large.428 Hence, many ELV companies launch their first newly developed

rocket with a dummy payload. In some cases this practice represents a lost launch

fee of more than $100M dollars.429 After one or two successful launches, the

provider can generally begin launching payloads for fees. Prices, however, can

sometimes be more easily negotiated downwards for some number of launches

following a failure… if a customer can even be found. Thus, diffusion into the market

for a new ELV requires embracing significant costs and high risk. A launch failure

428 It can take more than a year just to schedule a launch. Depending on the type of satellite to be fabricated and the manufacturer’s lead times and current capacity, the total process can take two years. 429 In at least one case, the customer is actually paying for this. The United States Air Force will pay Boeing $141M to launch a dummy payload on Boeing’s premiere launch of its first Evolved Expendable Launch Vehicle next year. This payment, however, results from development program cost sharing arrangement that is anticipated to save the Air Force more than 25% of launch costs over the next few decades.

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early-on may require the developer to invest in additional launches of dummy

payloads or even in significant cost and schedule killing system redesigns.430 The

costs and risks associated with diffusion of a new ELV can represent a formidable

barrier to entry.

Market Entry of New Entrepreneurial ELVs

Rather than trying to enter the market through an unobtrusive niche or grabbing a

modest share of an emerging market, every new entrepreneurial ELV entrant to date

has focused on attacking the very well established, low Earth orbit payload market.

This has pitted them against the giants of the launch vehicle industry, a formidable

challenge especially considering that the costs and reliability aspects of the new

entrant were not significantly better than the incumbents. On the contrary, in some

cases predicted system reliability for the new entrants was considered particularly

weak, to the degree that they had great difficulty attracting customers. An example

of this was Space Services, Inc. (SSI). One of the earliest private expendable

launch vehicle ventures, SSI carried out the first successful privately funded rocket

launch by a private U.S. company in September 1982, but was never able to

successfully market their final launch vehicle product.431 Some relatively new

entrepreneurial launch vehicle developers (e.g. TGV Rocket, Vela Technology)

apparently have learned this lesson and are focusing on space tourism applications,

a potential future emerging market.

Market Entry of New Entrepreneurial RLVs

The diffusion of an entrepreneurial RLV into the market is likely to be initially

similar to that of an ELV, but with an extended initial “prove out” phase due to the

RLV’s higher level of complexity. Legitimacy concerns will be an important factor,

especially if a small entrepreneurial firm with no established brand image and little

430 When a failure occurs with a major launch system, the system is grounded while launch accident investigative teams spend weeks, sometimes months, in determining the cause. Correction of the cause might take a considerable period of time, even a year or more as was the case with the Space Shuttle after the Challenger accident where significant subsystem design changes were required to assure reliability and safety.

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manufacturing or integration experience developed the RLV without a prime’s help.

Like an ELV, an RLV will have to prove itself on several launches in order to

establish customer confidence in the system’s reliability and performance. Many

RLV concepts, however, have a distinct advantage over their ELV cousins in this

area by offering the opportunity for incremental flight testing and prove-out of the

system, increasing the chance of finding and solving critical problems before they

occur.

Once a reliability trend has been established, however, product diffusion for an

RLV should be significantly different from an ELV. This is due to the RLV’s huge

advantage in costs, turn around time, and reliability.432 Even if the developer does

not choose to pass along the bulk of the cost savings to the customer, customers

would still quickly come onboard due to high value provided by all three advantages

working in concert. The RLV firm might offer prospective customers, “we’ll launch

your payload the same week the manufacturer completes it, whenever that is, at

only 80 percent of our competitor’s price and with a 100 times less chance of your

payload being destroyed in flight or placed in a useless orbit.” Such a proposition

would be hard to resist by even the most conservative customer.

The well-proven strategy of keeping a low profile while attacking the market

share of strong incumbents is lost on most new space launch entrants and

entrepreneurial RLV and ELV developers, who seem to thrive on publicity. This

might be because the potential downside (an incumbent’s reaction such as a price

war) is less feared than not being able to acquire enough capital to stay solvent, a

critical problem for new entrants.

431 Cole, Bob, The Prospects for U.S. Ventures in Space Launch, IC2 Institute, The University of Texas at Austin, 1989. 432 I’m assuming a successful RLV development effort in terms of meeting NASA’s SLI 2nd Generation RLV Program cost goal of $1,000 per pound to LEO and reliability goal of .9999.

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Intellectual Property & Appropriability

A review of the entrepreneurial launch vehicle developers in the space launch

industry as well as the number and scope of the U.S. patents held by those ventures

seems to point to a polarization in technology complexity and intellectual property.

Firms tended to either use a low technology, low appropriability433 approach, almost

completely employing commercial off-the-shelf-technologies in their vehicle designs,

or the opposite – a new technology, high appropriability approach. Historically, firms

employing the latter strategy (e.g. Beal Aerospace, Starstruck, American Rocket

Company) generally failed to complete vehicle development, usually running out of

funds before a full-scale prototype could be test flown. ELV entrepreneurial firms

employing the low technology / low appropriability approach (e.g. Space Services,

OTRAG) were more successful in developing their vehicles but still failed, generally

due to a poor performing product. Nearly all of the RLV entrepreneurial firms I

examined also fell into the low technology / low appropriability category. Most of the

current entrepreneurial RLV development firms employ a low risk design and

development philosophy, using only current technology and commercial off-the-shelf

components where possible. Intellectual property protection tended to be weak or

even non-existent, and where it was employed it was generally done so at the

architectural level. Pioneer Rocketplane, for example, holds patents on its aerial

propellant transfer launch assist for its Pathfinder RLV concept. Likewise, Kelly

Space and Technology’s Astroliner RLV concept uses a patented tow-launch assist.

Kistler Aerospace Corporation’s K-1 is designed to use as much off-the-shelf

technology and components as possible, yet the company holds several patents on

their airbag recovery system.

Design trade secrets will likely provide significant protection for a successful RLV

entrant into the space launch market. An RLV’s very high flight rate should create

large launch operations learning curve effects that should prompt process and

product innovation, leading to increases in the company’s tacit knowledge, trade

433 Intellectual property rights, tacit knowledge, trade secrets, etc.

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secrets, and number of patents. This operations learning curve is especially

important to an RLV since operations can account for up to 45% of the cost of each

launch.434

Complementary Assets & Strategic Alliances

Small, entrepreneurial reusable launch vehicle developers are likely to have

relatively weak competitive positions with respect to the following complementary

assets: marketing and sales, brand, reputation and relationships with customers and

suppliers, capacity, and manufacturing capability. Thus, acquiring the

complementary assets of one or more of the aerospace primes (Boeing, Northrop

Grumman, Lockheed Martin) through strategic alliances may be critical to the RLV

entrepreneur’s success. The primes also could offer other assets such as in-house

research and development engineering talent, invaluable launch vehicle

manufacturing and integration experience, and test facilities that are either unique or

of limited availability. In 1999, for example, Pioneer Rocketplane complained in

congressional testimony of having to go to South Africa to get access to scarce wind

tunnel resources.435 A prime may be able to access exclusive supply channels for

critical RLV commercial components that a smaller new venture cannot; the inability

to acquire licensed Russian rocket engines has already stymied at least one

entrepreneurial RLV developer. A prime may also be utilized to help develop and

build certain specialized complementary assets such as launch and payload

processing facilities.

In many industries, one way to partially mitigate the wrath of established

incumbents is for a new market entrant to establish strategic alliances with some of

them, trading a portion of potential future wealth to acquire a toehold in the

marketplace as well as critical complementary assets. I could not find evidence of

such alliances occurring between the dozen or so entrepreneurial RLV developers I

434 United States Congress, Office of Technology Assessment, Reducing Launch Operations Costs: New Technologies and Practices, OTA-TM-ISC-28, Washington, DC, September 1988.

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examined and the domestic, incumbent, launch service providers, Lockheed Martin

and Boeing. This might be attributed to the reluctance of the incumbents to provide

a competitor with a toehold. It might also be attributed to the very low degree of

development maturity of the RLV entrepreneurs, except perhaps for Kistler.

Supply-side Economies of Scale & Learning Curve Benefits

Space launch services annually consume a relatively small number of extremely

complicated and expensive rockets. Last year, for example, sixteen different private

companies or government organizations launched an average of only approximately

four times each. Due to the small number of rockets manufactured and launched,

economies of scale are slight and ELV manufacturing and launch operations

learning curves produce little benefit. Subsequently, launch costs have not

decreased very much over the past few decades, and where prices have decreased

substantially it is likely due to higher government subsides rather than cost reduction

due to economies of scale.

One exception might be some of the former Soviet Union’s ELVs (e.g. Proton,

Soyuz, Zenit) that are currently offered at launch prices significantly lower than

Western rockets by Russia, Ukraine, and some international partnerships such as

International Launch Services and Sea Launch. Due to the instability of the orbits

they were geographically constrained to launch into and their shorter average

satellite lifespan, the Soviets were forced to historically launch much more frequently

than the West to maintain roughly comparable assets in space. In 1985, for

example, the Soviet Union had 98 launches compared to only 17 for the United

States.436 With such higher flight rates, steeper Soviet manufacturing and

operations learning curves might be the main reason for the lower launch prices

currently offered by members of the former Soviet block. Alternatively, the price

435 Clapp, Mitchell Burnside, Testimony at the “Commercial Spaceplanes” hearing to the House Subcommittee on Space and Aeronautics, U.S. Congress, 13 October 1999, www.house.gov/science/ 436 Kranzberg, Melvin, “The Top Line: Space as Man’s New Frontier,” in International Space Policy, Papp, Daniel S, and John, McIntyre, R., Editors, Greenwood Press, Inc., Westport, Connecticut, 1987, p. 17.

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differences could instead be the result of far less costly manufacturing, engineering,

and operations labor, excess capacity, or perhaps the treatment of certain costs as

sunk costs and not trying to reclaim their amortized values in launch fees.

The cumulative manufacturing learning curve for a future successful RLV entry

into the space transportation market is also likely to be very flat due to the small fleet

sizes, usually planned for only 2 to 6 vehicles. In contrast, however, the cumulative

flight operations learning curve for an RLV should be steep, providing it with an

additional critical competitive advantage over ELV competitors. This is because

each RLV will be flown at a relatively high flight rate – perhaps eventually 25 times

or more per year – and allow the firm to translate learned efficiencies and

innovations in launch operations into reduced costs. Cost reductions passed along

to the customer could stimulate increased demand, leading to a greater share of the

current market. This in turn would lead to a further increase in flight rate, cost

reductions associated with increased accumulated learning and operations

innovations, and further cost reductions in a virtuous cycle.

If the price elasticity of launch is high enough, reduced costs could also cause

significant market expansion as emerging markets become economically viable.

These new businesses, in turn, may drive the demand for additional RLVs to be built

and flown, increasing manufacturing learning curve economies of scale as well.

Several other factors unique to a new RLV entrant will contribute to the

steepness of its learning curves and hence increase its cost advantage. In contrast

to ELVs, an RLV will likely incorporate a standardized payload bay and payload-

vehicle interface, negating the need for individual tailoring of the launch vehicle for

each individual payload and allowing for more process innovation. Also, most RLV

concepts will require construction of a new launch facility designed explicitly for high

frequency, low-cost flight operations. New infrastructure will remove past constraints

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to operations innovations and thus also enhance learning curve benefits.

Economies of scale will also likely result in significantly lower propellant costs.437

There are other traditional business scale efficiencies a newly established RLV

service provider could leverage. Continued technology and process improvements

could lead to lower costs and lower launch risks, and therefore indirectly to greater

market share. Subsequent increases in revenue lead to increases in profits, cash

flows, and in company growth rate, which together increase the level of expected

future earnings and thus the stock price. Increases in stock price lead to a higher

market value relative to book value and lower the risk of default, which in turn

reduces the firm’s cost of capital. Reduction in cost of capital, or the cost of debt as

measured by the premium over the prime interest rate charged by a lender, directly

lowers launch costs. These improvements increase industry demand as well as

market share in a reinforcing cycle.

Cost versus Price

Even if successfully developed and operated at significantly lower costs than

current launch systems, RLVs do not necessarily lead to lower priced launch

services. 438 If demand for launch services is high enough and the new RLVs don’t

have a high enough capacity to meet this demand by themselves, some customers

will be forced to employ other, more expensive launch services. Thus, an RLV

company may have little incentive from a short-term perspective to offer launch

services much cheaper than the current market price. Barriers to market entry are

high and a firm will be tempted to maximize profit.

437 An RLV will most likely employ either liquid hydrogen / liquid oxygen or kerosene / liquid oxygen as propellants. Some studies claim a high enough launch rate would enable very cost effective production of liquid hydrogen at the launch site, either by leasing facilities from a supplier or by the launch company creating their own capability – a business vertical integration. 438 Henning, Garth, “Modeling Launch Vehicle Economics,” Aerospace America, Vol. 37, No. 3, Pg. 36, March 1999.

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Launch Vehicle - Payload Interface Standardization

Traditionally, payload integration in ELVs is time consuming and expensive.

Because launch vehicle payload bays and interfaces are not standardized, and

because satellites have historically been both very costly and physically unique,

most ELVs have had to be significantly redesigned for nearly every flight. Launch

and mission operations can account for up to 45% of the cost of each launch, and

payload integration can be a major fraction of the cost of launch operations.439

Thus, switching costs to the customer have been traditionally rather low as long as

the switch is to another launch provider of approximately equal reliability. Thus

situation has changed with the relatively recent advent of LEO satellite

constellations. Composed of numerous identical satellites, these constellations have

enabled the satellite manufacturers to practice assembly line fabrication (in as

limited scale as it may be) for the first time. Standardization of the satellites has also

prompted some limited launch vehicle payload interface standardization, a practice

that will increase switching costs.

Standardization of the payload bay and its interfaces with the launch vehicle,

accompanied by automated checkout procedures and an off-line processing and

testing capability, may be a source of significant competitive advantage for a future

reusable launch vehicle. Standardization of launch vehicle - payload interfaces has

tempted launch vehicle designers for decades but has not yet been carried out in a

widespread manner due to customer reluctance to pay the associated penalties.

These penalties are the additional initial payload design expense and, in many

cases, an increase in payload mass leading to additional attitude control propellant

mass requirements and an increase in orbit insertion booster weight.440 This could

be a very expensive proposition if the customer is charged the typical fee of $5,000

or more to place each of those extra pounds into orbit. However, standardized

payload interfaces will greatly reduce the time required to conduct launch vehicle

439 United States Congress, Office of Technology Assessment, Reducing Launch Operations Costs: New Technologies and Practices, OTA-TM-ISC-28, Washington, DC, September 1988. 440 Conversely, of course, the penalty could be absorbed as a decrease in payload functionality for a constant weight.

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payload design integration, mating, and testing. This practice would thus save RLV

operators considerable money as well as significantly reduce turn-around time. A

reduction in turn-around time may enable an increase in flight rate, which would

boost an RLV operator’s cash flows as well as amortize the huge development costs

more quickly.

Proposed Market Entry Strategy for a New Entrepreneurial RLV

The above logically leads to a market entry strategy441 for a new entrepreneurial

2nd generation RLV: (1) form an alliance with an aerospace prime (if not already

done in the development phase, perhaps with an equity offering) to acquire needed

complementary assets such as marketing and sales, brand, reputation and

relationships with customers and suppliers, facility use, etc.; (2) combine

aggressively low launch prices with a standardized launch vehicle - payload

interface, subsidizing the customer’s design costs and weight penalties where

necessary; (3) grow flight rate as quickly as possible in order to leverage learning

curve benefits and economies of scale; (4) conduct intensive research and

development of launch operations processes and system hardware to increase

efficiency, drive down costs, and build appropriability and barriers to entry with

intellectual property protection and tacit knowledge; (5) once adequate market share

is captured, focus on creating a strong brand and improving customer service.

The economic attractiveness of a reusable launch vehicle system is heavily

dependent on its flight rate. Some studies indicate RLVs are not economically

feasible without a flight rate at least one order of magnitude higher than for existing

ELVs (e.g. one or two flights every two weeks versus six flights per year). Thus, the

success of a new RLV market entrant is critically dependent on its ability to fill its

flight manifest. Low prices, quality service, responsiveness, and a demonstrated

441 Obviously a market entry strategy for a future new RLV is dependent upon the future competitive climate, unexpected technological breakthroughs, and a myriad of other factors that can’t be foreseen. In this speculative context, the posed preliminary strategy assumes (1) that this RLV meets NASA’s current SLI cost and reliability goals, (2) it is the first 2nd generation RLV to enter the market, and (3) market entry would occur within the next few years. The latter implies the primary competition would be either today’s expendable launch vehicles or newly developed ELVs.

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high degree of system reliability are essential to attract and retain customers. Low

prices are especially important for attracting new customers, and even lower launch

fees are needed to entice conservative customers to switch from their current launch

services provider.

Rapid imitation of a new RLV by competitors would be difficult due to the lengthy

development time and other barriers to entry. Depending on the maturity of the

concepts of competing RLV developers, the first new successful 2nd generation RLV

to reach the market will have a large advantage, and perhaps several years lead

time over its competitors. One goal of the new entrant is therefore to grow as rapidly

as possible, taking market share from established ELV services, in order to quickly

begin accessing launch operations learning curve benefits and leveraging

economies of scale. The new RLV market entrant will have to avoid the temptation

to price its launch services near market prices, which may maximize profit but slow

growth. Increased profits would be eventually realized by holding an increased

market share as well as lower costs due to learning and scale economies. Because

there may not be enough room in the commercial marketplace to support more than

one or two RLV launch service providers,442 it is imperative that the new RLV entrant

acquire as much market share as quickly as possible in order to create even higher

barriers to entry for follow-on RLV competitors. It will be a difficult enough task to

wrest market share from government subsidized ELV competitors; a price war with

an RLV competitor backed with significant investor capital could be untenable.

As noted above, use of a standardized payload – launch vehicle interface will

reduce launch operations costs and may enable a higher flight rate. This change in

the business model may be interpreted by some customers as disruptive and

consequently may be difficult for them to accept without a sizable economic

incentive. To acquire these reluctant customers the new RLV entrant must take on

the burden of these switching costs, subsidizing them in the form of even lower

442 At current market conditions. This may change significantly in the future if the launch price elasticity enables certain emerging markets.

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launch prices, at least for a period of time. Although initial profits would be far lower

than necessary, product lock-in would be greatly enhanced once satellite designers

switched to the new RLV entrant’s standardized interface.

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7. Summary & Observations

This thesis addressed several facets of the space industry that affect the

development of reusable launch vehicles: the development of the space launch

industry, supply and demand for space launch vehicles, and ELV and RLV system

and technology development programs. ELV research focused on new entrants to

the launch vehicle market and on entrepreneurial development efforts. RLV

research focused on concepts under development by industry, the United States

government, foreign nations, and especially by small entrepreneurial ventures.

This thesis also presented a number of observations of technology development

trends and strategies from ELV and RLV technology and system development

programs. Additionally, an introduction to barriers to entrepreneurial RLV

development was offered, concentrating on legitimacy issues and the problems of

financing such high-risk ventures. Finally, technology and market entry competitive

strategies for entrepreneurial RLV ventures were investigated and recommendations

made.

Summary

Responsive, affordable space launch, using reusable launch vehicles to place

payloads into orbit at fraction of today’s exorbitant costs, will become a reality within

the next two decades. As the railroads unlocked the American West, and as the

modern airplane shrank our planet, RLVs will open space with vast commercial,

scientific, humanistic, and military payoffs. The nation that wins this economic space

race will gain significantly through the growth of entirely new industries and new

technological developments, reaping large financial rewards from increases in

employment, corporate & personal tax revenues, and export revenues.

This transportation revolution will require responsive and affordable space launch

costing an order of magnitude less than that of today’s systems. The keys to

responsiveness and low cost are operability, reusability, and their enabling

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technologies; the keys to a successful business case appear to be successful

government involvement in technology development and financing.

The space launch industry is characterized by a very high degree of risk, high

costs, and very large barriers-to-entry, so large that nearly every successful launch

system in use today was originally sponsored by its respective government. Barriers

to entry into the launch service market include development of vehicles requiring

very complex, risky, and costly technologies, large expensive infrastructure

investments, and high market risk. Governments and their large aerospace

contractors consequently dominate the industry.

The riskiness of space launch is legendary; the historical launch vehicle success

rate over the past 40 years is only about 85%, and over the past decade, about

95%. Launch failures are unforgiving and almost inevitably result in loss of both the

launch vehicle and its payload. Losses from a single launch can amount to more

than a billion of dollars, and in case of the relatively rare manned flight, to loss of life

as well.

Space launch costs are extremely high, with an industry average price tag in the

range of $5,000 - $7,000 for placing one pound of payload into low Earth orbit. The

prices charged by many launch services are competitively influenced by direct or

indirect government subsidies, including investments in research and development,

and launch infrastructure.

Initial outlays to develop a new generation launch vehicle are enormous and the

development process itself is risky and time consuming. Rather than developing a

completely new launch vehicle, manufacturers in the past have instead almost

always incrementally upgraded the performance of their current rockets. After about

half of a century, the result is a launch vehicle industry that exhibits many

characteristics of a mature industry – incremental change, competition based

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primarily on price, focus on manufacturing and process technologies rather than

product technologies, etc.

Over the years the satellite industry has matured significantly as well. Payloads,

once few in number, unique, temperamental, and technologically complex, have

become routine, less risky, more robust, and increasingly fabricated using

standardized, commercial off-the-shelf technologies. Ground-based support for

space launch and on-orbit assets has also become more routine. Increased

competition and, in some cases, technology maturation have caused both launch

and payload costs to decline to the degree that small satellites, once the pride of

nations, have become commonplace and owned by universities and even clubs.

The 1990s saw a large increase in global launch service competition as demand

dramatically increased primarily due to growth in the communication satellite arena.

Several multinational alliances were formed between the East and the West to

launch and market low priced, reliable Russian and Ukrainian ELVs as well as

create new ventures, such as Sea Launch, Eurockot Launch Services GmbH,

Starsem, and International Launch Services. A number of new expendable launch

vehicles have entered the market over the past few years or will soon enter, helping

to create the greatest overcapacity of launch services ever. New ELV market

entrants include Boeing’s Atlas V, Lockheed Martin’s Delta IV, Arianespace’s Ariane

5, and Japan’s H2A.

Except for the partially reusable Space Shuttle system, every orbit capable rocket

today is an expendable launch vehicle (ELV). Reusable launch vehicles promise

vastly increased reliability and lower costs over ELVs, and thus they have been

earnestly pursued in research and development programs for more than 30 years.

Yet to date, no developmental RLV program has succeeded. Despite this, in the last

decade more than 15 small entrepreneurial RLV companies have formed, all vying

to do what governments and the aerospace giants such as Lockheed Martin and

Boeing have failed to do - develop a commercially viable RLV. This, in the face of a

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Space Shuttle total development bill of about $40 billion, the failure of the National

Aero Space Plane program to the tune of over $3 billion, the recent failures of the X-

33 and X-34 programs at over $1.5 billion, as well as a host of other formidable

deterrents. And this, despite the fact that the past is littered with failed ELV

entrepreneurial efforts, a much less challenging development effort than that posed

by an RLV.

The entrepreneurial RLV firms examined in this thesis were Kistler Aerospace

Corporation, Pioneer Rocketplane, Kelly Space and Technology, Rotary Rocket

Company, and Space Access, LLC. Kistler received the most attention, due to its

leadership over the others with respect to design maturity, management team,

capitalization, and fabrication.

The odds are that most, if not all, of the current entrepreneurial RLV development

efforts will fail. Regardless, there is always a chance one of the leading candidates

will succeed. Certainly, the potential payoff is huge; a successful RLV (in terms of

cost effectiveness, safety, and reliability) would be a disruptive product,

revolutionizing the space launch and earning fame and wealth for the winners, as

well as a well-deserved place in history books alongside the likes of the Wright

brothers.

Financial markets have not favored commercial RLV ventures. A number of

entrepreneurial RLV development businesses were started in the mid-1990s,

bolstered by the then bullish, even exuberant, LEO communications443 satellite

market that appeared to underestimate the threat of fiber optics. With the

bankruptcies or deep financial straits experienced by Iridium, ICO, Orbcomm,

Globalstar and others in the last two years, the LEO market has since drastically

declined. Financing entrepreneurial launch vehicle system development is very

difficult and will require large amounts of risk capital that far exceed venture capital

443 Telecommunications, digital television, radio, paging, tracking, telephone, earth observing, and Internet services satellites provided high demand for satellites and launches throughout much of the 1990s.

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markets. Large corporate joint ventures, syndicates, the United States government,

or other large funding sources will likely be necessary to capitalize some of these

efforts.

Ironically, while demand has dropped launch capacity has reached an all-time

high. Some view future demand for LEO launches very grimly. The 2000 ten-year

satellite forecast by the FAA, for example, predicts about half the demand for LEO

payload launches than it did in 1997. Still, some forecasts see the multimedia,

remote sensing, weather, and navigation portions of the satellite market significantly

increasing over the next decade. Spaceway, a geostationary constellation of 8

satellites, currently provides fixed telephone service for developing areas, fax, and

broadband multimedia, and is thought by some to have a good shot at capturing a

reasonable Internet broadband subscriber base. And Teledesic, the “Internet of the

Sky,” the most blatantly ambitious LEO constellation project of all those planned in

the 1990s, still remained in a planning mode as of last year.

Motivated especially by the recent souring of the LEO communication satellite

market, reusable launch vehicle developers are carefully scrutinizing other facets of

the launch market. Several yet untapped commercial markets may increase

demand for space transportation services in the future. Space tourism, for example,

has been extensively studied with some supply and demand forecasts showing a

potentially lucrative market – but only enabled by launch costs of a fraction of those

of today’s systems. Micro-, nano-, and picosatellites may offer a relatively

inexpensive architectural option to the satellite industry in the future, perhaps

enabling a resurrection of demand for LEO launches. Another area of high market

potential is in very fast freight services where a company would provide nearly global

package delivery in a mere few hours rather than overnight using RLVs with

suborbital trajectories. Such an offering could obviously be extended to a suborbital

passenger service. Other possible markets for RLVs are to launch payloads for

space solar power, space-based manufacturing, satellite-aided agriculture, and even

advertising and entertainment.

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Observations

The following observations were made of technology development trends,

issues, and strategies from ELV and RLV technology and system development

programs examined in Chapters 4, 5, and 6.

RLV Dominant Design / Winner Take All Market

The future space transportation market will effectively be a niche market with

perhaps less than a dozen RLVs sufficient to meet worldwide low Earth orbit launch

demand for some time. With this in mind, the first successful444 RLV stands a good

chance of being the de facto dominant design. With such lengthy development

times, large required investment, and other barriers to entry, the first successful RLV

fleet may tip the commercial market toward a “winner take all” situation. Although

many commercial launch systems would be driven out of business, some of those

subsidized by their governments would likely survive due to nationalistic and

strategic considerations, and the reluctance of customers to rely on a sole source

launch provider.

Entrepreneurial Launch Vehicle Development is Very Challenging

Entrepreneurial reusable launch vehicle development poses an extremely risky

and difficult challenge. The past is littered with failed entrepreneurial launch vehicle

development ventures, and to date no entrepreneurial ELV or RLV venture has

succeeded. Further, the entire current crop of entrepreneurial RLV developers

appears to be foundering, at least with respect to acquiring sufficient capital to

complete development. Government and corporate programs have faired no better.

NASA cancelled their X-33 and X-34 programs just a few weeks ago at a cost of

$1.5 billion due to technological problems and massive cost and schedule growth.

444 A “successful” RLV is one which meets NASA’s Space Launch Initiative 2nd Generation RLV program cost goal of $1,000 per lb to LEO and reliability goal of 0.9999, respectively.

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Entrepreneurial Developers Almost Exclusively Use Current Technology

Nearly all of the entrepreneurial designs employ current technology almost

exclusively. Additionally, most ventures also emphasize their use of commercial off-

the-shelf components wherever possible, notably Russian liquid oxygen / kerosene

rocket engines. These companies generally hold little intellectual property protection

other than on an architectural level or for special discriminating innovative designs,

such as Kelly’s patented tow-launch assist, Kistler’s landing recovery system, or

Pioneer’s aerial propellant transfer. Most of the few entrepreneurial launch vehicle

developers that did more extensive technology development perished (e.g. Beal,

Rotary Rocket, Starstruck, American Rocket Company).

Stepping Stone, “Build a Little, Fly a Little” Approach

The large amount of financing required for commercial RLV development

coupled with significant market risk, the employment of a myriad of high-risk

technologies, the lack of Federal assistance beyond early stage RLV technology

development, and numerous other barriers to entry have greatly undermined

successful RLV system development. Historically, the U.S. government has stepped

into the fray of past transportation technology and infrastructure development with

investments and funding incentives. Over the past two decades, however, the U.S.

government’s performance in RLV development has been dismal, characterized by

repeated attempts to leapfrog critical technologies rather than applying a pragmatic,

stepping stone, “build a little, fly a little” approach that was so successfully utilized in

experimental aircraft development a few decades before. This approach has

resulted in the failure of the X-30, X-33, X-34, and other RLV development programs

with an accumulated cost in the billions of dollars. In contrast, DoD’s modestly

funded DC-X and X-40A programs set challenging but practical goals which they

very successfully achieved.

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Legitimacy

Since reliability is such a primary concern to customers, legitimacy plays a major

role in the sales of launch services, particularly for future market entry of a small

entrepreneurial firm with no established brand image and little manufacturing or

integration experience. Some legitimacy concerns could be mitigated if the small

entrepreneurial firm contracts to established industry figureheads for at least all

critical systems and subsystems, if not integration as well. Some in the current wave

of RLV entrepreneurs are utilizing these resources as part of their strategy to use

current technology and commercial off-the-shelf components wherever possible.

RLV developer Kistler Aerospace, for example, has made extensive use of expert

contractors to design and manufacture K-1 components, including Lockheed Martin,

Northrop Grumman, GenCorp Aerojet, Draper Laboratory, AlliedSignal Aerospace,

Irvin Aerospace, and Oceaneering Space Systems.445

Historically, small new entrants have essentially “bet the company” with each

launch. A new entrepreneurial RLV market entrant will likely have neither the capital

nor the brand to overcome an early catastrophic launch failure, which usually

requires an extended period of further engineering and redesign. Only with

customer-perceived legitimacy can the RLV venture wrest market share from well-

established space launch incumbents in an economically viable period of time.

Legitimacy plays an even more critical role when the payload is human. Even

with adequate reusable launch vehicle offerings, the space tourism market will never

grow significantly until the customers’ perception of safety is satisfied. Public

acceptance of a new space tourism business based on a new RLV concept will be

obviously heavily influenced by the perceived legitimacy of the company offering the

service. The company’s legitimacy and its ability to obtain investment capital,

however, are also influenced to some extent by the overall industry’s safety and

reliability records.

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The legitimacy of NASA, DoD, the incumbent aerospace industry, and new RLV

entrepreneurial ventures to develop an RLV have been eroded by the highly visible

and costly failures in developing RLVs and RLV technology demonstrators. The

false hopes and broken promises of NASP, X33, X34, and other poorly designed

and executed programs may also have discouraged private sector investment in

commercial RLV ventures.

Disruptive RLV Technologies versus Disruptive RLV Systems

The RLV research community has often implicitly assumed that revolutionary

technology advances are required in order to create a revolutionary product. This is

not the case with some very complex, highly nonlinear systems such as RLVs where

integration of a myriad of evolutionary technology advances can sum to a

revolutionary product, that is, a reusable launch vehicle having a revolutionary

performance capability.

The more traditional approach towards RLV technology development,

unfortunately, is that of isolated component specialization and optimization. This

approach is strengthened by the high level of technological complexity of even the

minutest components, resulting in laboratories where technology specialists are now

the norm and generalists very rare. The professional interests of the researchers

usually serves to strengthen their enthrallment with disruptive technologies; the lure

of high technology is often dizzying for RLV development managers and engineers

who succumb to the mirage of exciting, potentially disruptive, subsystem

technologies, losing sight of overall system objectives. Such technologies might

eventually prove to provide a disruptive performance capability for the subsystem in

isolation, yet almost invariably present a suboptimal solution for the overall RLV

system due to critical nonlinear integration issues. RLV designers found this to be

445 Mueller, George, Written Statement of Kistler Aerospace Corporation, Presented at the “Commercial Spaceplanes” hearing to the House Subcommittee on Space and Aeronautics, U.S. Congress, 13 October 1999, www.house.gov/science/

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the case with the NASP program with the revolutionary, advanced airbreathing

propulsion system, spending billions of dollars to discover their error.

Proposed Market Entry Strategy for a New Entrepreneurial RLV

A market entry strategy for a new entrepreneurial 2nd generation RLV was

developed in Chapter 6: (1) form an alliance with an aerospace prime (if not already

done in the development phase, perhaps with an equity offering) to acquire needed

complementary assets such as marketing and sales, brand, reputation and

relationships with customers and suppliers, facility use, etc.; (2) combine

aggressively low launch prices with a standardized launch vehicle - payload

interface, subsidizing the customer’s design costs and weight penalties where

necessary; (3) grow flight rate as quickly as possible in order to leverage learning

curve benefits and economies of scale; (4) conduct intensive research and

development of launch operations processes and system hardware to increase

efficiency, drive down costs, and build appropriability and barriers to entry with

intellectual property protection and tacit knowledge; (5) once adequate market share

is captured, focus on creating a strong brand and improving customer service.

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